Google's Philanthropy
By: Susan Raymond, Ph.D., 9/20/06

In 1992, as the Cold War heaved one last shudder and then quietly breathed its last, Francis Fukuyama wrote a book titled The End of History.  Widely misunderstood, Fukuyama’s premise was not that the course of events had ended.  Rather, Fukuyama proposed that a single, evolutionary pathway of progress had ended.  The old Hegelian and Marxian categories of “traditional” and “modern,” “primitive” and “advanced” that had underpinned the definition of history as evolutionary progress had ceased to be useful.  The broad, global acceptance of the superiority of representative democracy as a means of human organization and governance would give rise to many varied applications of that acceptance in terms of institutions and political systems.  A common acceptance of the utility of democratic principles would create many culturally nuanced applications, in politics and economics, but these would no longer be able to be arrayed on some clean evolutionary line moving from something lesser to something greater. 

The emergence of Google.org as a for-profit philanthropy, and its comparable organizations such as Whole Foods, may be bringing us to The End of Definitions in the philanthropic and nonprofit worlds. 

Google.org will be a “foundation” that will invest in (and expect to make a return on) social problems.  It fully expects to pay taxes, and asks no forgiveness from the American taxpayer.  First up will be ultra fuel efficient plug-in automobiles. 

But wait.  There is actually a market for automobiles.  There is also a market for clean technology for automobiles.  How is Google.org a philanthropy?  How is General Motors not a philanthropy?  Making matters worse, GM is NOT making money and Google.org will (or it assumes it will).  So, is GM a “nonprofit” and Google.org not?

What IS a nonprofit?  What IS philanthropy?  And, whatever these terms mean, who should NOT pay taxes?

In centuries past, these were fairly straightforward definitions.  Philanthropy was charity, the donation of private dollars to private organizations and individuals caring for social problems for which no private organization had a sufficient commercial interest that motivated action and for which no government agency wished to raise taxes.  Orphanages.  Soup kitchens. Homeless shelters.

In the past several decades, the blurring began and definitions began to erode. 

Step One.  When nonprofits become the agents of government (as major contractors providing services that the government had previously provided), how are they the private expression of private voluntary effort to address social problems held in common?  Are they not contractors like any other contractor?  Does it matter if one privatizes prisons to a nonprofit or a for-profit entity?  After all, the only real difference between the two as contractors is whether or not the net resources at the end of a fiscal year are distributed to shareholders or are held to be applied to next year’s budget.

So, how are nonprofit contractors really expressions of philanthropy?

Step Two.  The emergence and, more importantly, market success of commercial organizations like Starbucks and Whole Foods.  As business entities, these are corporations organized and operated on the principles familiar to any business school.  They compete in a commercial market with other similar companies.  They pay taxes.  They conform to SEC policies.  They have Boards with fiduciary responsibilities.  Their executives worry about per-store revenues and how to grow sales. They put their business pants on one leg at a time, just like other companies.  But, they are that and more.  The premise behind their products, indeed behind their existence, is far beyond the product itself.  The product reflects a relationship to some non-commercial value or mission.  For Whole Foods, for instance, it is the premise that what is fresh and organic is good for the environment and good for the health of people.  That it also makes money is an expression of the market (and a fortunate one at that) but it is not the purpose of the endeavor.  Are these corporations not also on the social commons?  Do they not address a problem (e.g., public health) that supposedly is not sufficiently in the interests of any one person or organization to address and therefore requires nonprofits and philanthropy?

So, how are such companies not philanthropies?
 
If obesity is a public health problem, how is Gold’s Gym not classified as a nonprofit and the YMCA is?  Apart from distributing profits to shareholders and paying taxes, of course.  If Gold’s Gym dedicated itself to the health of America’s youth, but distributed its profits to its shareholders and paid its share of its taxes, is it any less on the social commons than the YMCA?

When (if) Google.org’s investments in technology pay off, Google.org will reap the financial rewards.  It may not distribute these to shareholders.  It may retain them for the next round of social investments, but the same may not always be said about its partners.  Also gaining will be the venture capitalists (all of whom, one assumes, got where they are not with bleeding hearts but with cold hard analytics) who have joined in capitalizing the investments.  Everyone will make money.  Jobs will be created.  Value will be added to the economy.  Taxes will be paid.  AND the environment will be cleaner, and global warming will take one more left jab to its chin.

How is this “philanthropy?”  The end is socially driven, but the means are the beauty of capitalism carried out largely in the marketplace.

Clearly, The End of Definitions is upon us.

This is a good thing.  Change reflects the adjustment of institutions and intellects to the realities of life.  As Abraham Lincoln observed, “The dogmas of the quiet past are inadequate to the stormy present.”

Unlike Fukuyama’s End of History, however, the result of The End of Definitions is not academic.  Whether history is studied along Hegelian lines or along the more diverse patterns observed by Fukuyama, the intellectual insights that are to be gained may have long term impacts on how we understand and craft public policy.  Or they may fuel any number of Ph.D. dissertations.  Both are important, but neither is particularly immediate.

The End of Definitions, however, does have immediate and concrete implications.  Hundreds of millions of dollars are foregone in the U.S. economy because of the concept of tax-exemption for nonprofit roles.  Tens of thousands of organizations are not expected to be transparent or to conform to many aspects of our legal and regulatory framework because they are nonprofit.  Tens of thousands of philanthropies are afforded nearly complete freedom in how they allocate resources, and how they account for the utility of those resources, completely outside of the perceptions of taxpayers.

This is all good and has, for many, many decades, served the national interest.  We as a nation have been enriched immensely by these policies.

However, if we no longer know what we mean by the term “nonprofit” or “foundation” or “philanthropy,” how will we continue to make these distinctions?  When the world of capital and commercial markets blends into the world of the societal commons, when solutions to social problems are to be found not in voluntarism and the stray philanthropic dollar but on the very concrete commercial landscape of capitalism, how shall we define the nonprofit endeavor?  Does the distinction even matter any more?

Akin to Fukuyama, we appear to be on the cusp of developing a new common understanding in America.  It is an understanding that will perforce change our assumptions and our approaches to problem-solving.  We are beginning to understand that old categories of “commerce” “capitalism” “philanthropy” do not serve the new generation of either social problems or market opportunities.  We are beginning to understand that applying resources to the problems on the social commons is a commonly held value. It is a starting point for any number of financial, technological, or leadership directions.  However, and in part as a consequence, the tools that can be used to do so are myriad, varied, and combinatorial. 

We are at The End of Definitions.  Mr. Webster, where are you when we need you?

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About the Author

Susan Raymond, Ph.D., is Sr. Managing Director, Research, Evaluation, and Strategic Planning for Changing Our World Inc., a leading consulting firm helping nonprofits and private and corporate philanthropists achieve their goals.  Dr. Raymond is also Chief Analyst for onPhilanthropy (www.onphilanthropy.com), a global resource for nonprofit professionals.

She can be reached at sraymond@changingourworld.com