The Coming Paradigm Shift in Philanthropy: It's Not About the Money
Friday, September 5, 2008
By: Susan Raymond, Ph.D.

In 1962, Thomas Kuhn published a short but dense and complex book entitled The Structure of Scientific Revolutions. I do not recommend it unless you have a totally free weekend and a very large pot of coffee. The philosopher will spend a comfortable weekend with the book; we mere mortals will spend much of it befuddled.

Nevertheless, The Structure of Scientific Revolutions is a seminal work.  In it Kuhn examined how changes in scientific knowledge and worldview take place.  He posited that progress in science takes place because of fundamental shifts in paradigm.  I know, the term “paradigm shift” has been widely overused and misused, but let’s take a look at its real meaning, and examine how it may apply to philanthropy today.

Kuhn’s formulation drove to the true meaning of paradigm shift.  That is, facts do not match predictions, and gradually a whole new worldview emerges that overturns previous approaches and practices and leads to new understanding. In Kuhn’s view, this is not a matter of additions to traditional views, but rather the emergence and gradual acknowledgement of entirely new views.  A paradigm shift is not adjustment, it is the overturning of previous assumptions about how the world works, what is possible, and what the implications of the future are.  It is intellectual revolution.

We, I believe, are in the midst of a paradigmatic shift in philanthropy.  The shift is not about money.  It is about the entire structure of thinking and approach to problem-solving. 

To examine this thesis, let us begin with the definition of a paradigm.

A paradigm comprises the “rules of the road” for a discipline or an area of inquiry.  It is the acknowledged worldview of those who work in this area; it organizes and guides the definition of problems and the ways in which problems are approached.  It defines what is acceptable and unacceptable or unexpected, and places the latter on the margins.  Paradigms are the governing structures for inquiry and beliefs.  A paradigm is not a theory; it is the entire construct of assumptions, beliefs, and experiences that define the subject matter for theory.

How do paradigms shift?  Kuhn posits that change takes place when someone somewhere begins to pay attention to anomalies.  Why am I seeing something that the paradigm tells me I should not be seeing?  What is the nature of this oddity and why does it not fit?  Why does the paradigm not accept it?  Why is this oddity clearly on the map, but the map, governed by the paradigm, does not recognize it as being there?  Not just how can it be possible that the sun revolves around the earth when the data tell us otherwise, but how can it be possible that people do not see that?

We cannot, of course, push Kuhn’s analysis too hard.  It was developed to understand scientific progress.  Philanthropy is not science.  But, there is an analogous case to make.

Historically and largely still, philanthropy is about the transfer of money from the individual with it to the individuals without it.  The currency behind the relationship is that of a gift: a voluntary transfer of value from giver to recipient without compensation.  The gift is premised on resource redistribution to help those in need.  The framework is the intersection of the individual with resources and his/her particular interests and the solicitation of a particular organization in that area of interest who needs (or wants) those resources.  The individual philanthropist and the individual nonprofit are the units of analysis.  The objective is support of the work of the nonprofit.  The overall culture is one of gifting by donors to recipients; donors give money, recipients receive money.  Demanding donors may require information in return for their money, but information is not embedded in the gifting relationship.

In essence the relationship and the culture are asymmetrical.  The relationship is not one of mutuality of responsibility and accountability, but one of giver and receiver.  The explanation for the relationship is the power of generosity hotwired into the American spirit; givers will give because they see need, and they will give as required to resolve need.

Since 1966, $5.5 trillion has changed hands on this basis.  The number of public charities has increased by 200% in the last two decades; the inflation adjusted dollar value of philanthropy has increased by 104%.

But the anomalies in the paradigm are becoming clearer.  With $5.5 trillion flowing to 8.5% of the U.S. economy, there are objects on the map that the paradigm cannot explain.  Most nonprofits remain small and financially weak, regularly endangered by a turn of philanthropic fortunes.  Fundamental social problems continue apace, showing little progress for the dollars spent.  The portion of GDP or household income allocated to philanthropy has not risen much above 2.2% nor fallen much below 1.7% since records have been kept.  Nonprofits are not growing apace with problems and philanthropy is not growing beyond a fixed portion of economic capacity.  The anomaly is that we have growth without the progress that growth is supposed to create.  In classic paradigm-shifting terms, we have an outcome other than that which we would expect.

New observers are seeing this anomaly and are shifting the paradigm.  As in all paradigm shifts, a new view is not easily or readily accepted by the existing view, either because it is poorly understood or because it threatens existing interests or capacities.  Remember, a paradigm is not a theory or a set of tasks; it is the entire worldview that a discipline or sector brings to its understanding of the worth of its work and it defines the fundamental nature of problems to be addressed.  It is not surprising, then, that a change in paradigm is rarely smooth and never welcomed with open arms.

What is this new paradigm of philanthropy?  What are its fundamental components and assumptions?  What problems does it define as relevant to its endeavor?  What is its worldview?

First, the new paradigm seeks solutions.  The problem on the societal commons is not a lack of money so much as it is a lack of demonstrable solutions to problems.  The new money does not seek to transfer resources to help, it seeks to transfer resources to “fix it.”

Second, the loyalty in the new paradigm is not between the giver and the receiver (let us use these terms for now; they are amended below), the loyalty is to the problem.  The philanthropist focuses not on the nonprofit receiving resources, but on the problem being solved.  If nonprofit A cannot demonstrate that it can solve the problem, nonprofit B is just as likely to be supported.  The question then is not “do you do good work?” but “can you demonstrate that you can fix the problem?”

Third, the new paradigm does not think of resource transfer as a matter of gifts.  The new paradigm uses an investment model, either in fact or by analogy.  In its most innovative forms, the new paradigm seeks to flow resources to problems in ways that create sustained institutional capability and force accountability to the funder.  Loans and equity-like instruments may attract larger capital commitments than would pure charitable donations; the incentive is either a return on investment, or a flow of equity gains back into a central resource pool that can be recycled into yet further investments.  The strategy is not premised on gifting, it is premised on continuous self-sustained resource flows.

Fourth, the new paradigm seeks scale, because most problems cannot be demonstrably resolved except at scale.  Hence, the new paradigm values collaboration.  Philanthropists in the new paradigm do not see the world through a straw a singular relationship between philanthropist and nonprofit.  Rather, they seek to combine individual philanthropic resources toward a mutually perceived problem and use their collaboration to incentivize collaboration among nonprofits and across problem areas.  With scale defined as a problem, the investment culture seeks partner collaboration in both funding and execution.

Fifth, because partnership is essential to scale, the new paradigm values mutuality of problem definition and program execution.  “Engaged philanthropy” is a widely used and poorly understood phrase.  To nonprofits it often implies meddling; to philanthropists it can mean control.  More often it means exactly what it says.  The new paradigm places peer-relationships at its cultural core.  Philanthropists are not checkbooks; nonprofits are not forever dependent.  Planning flows both ways, information flows both ways, strategy for sustainability flows both ways.  Nonprofits retain and maximize their technical knowledge and educate philanthropists; philanthropists use their organizational, managerial, financial and other expertise to help develop actionable strategies.  Accountability is mutual; transparency is valued.

Sixth, because it is focused on solutions, the new paradigm insists on an exit strategy.  Engaged philanthropy is there to enable solutions that reach self-reliance.  Hence, it enters the relationship with nonprofits from a presumption of its own exit.  That exit is explicit in the relationship, and is a fundamental part of the mutual decisions about initiative design on the part of both philanthropists and the executing nonprofits.

What happens when two paradigms clash?  Kuhn’s thesis is that, in science, both cannot coexist.  The emerging paradigm re-defines the nature of inquiry and the nature of reality such that it replaces old ways, old questions, and old ways of thinking.  We cannot have a world in which it is equally true that the sun revolves around the earth and the earth revolves around the sun.  One must replace the other; both cannot be accurate depictions of reality.

Here the Kuhn model breaks down, but that should give us little comfort. 

It is true that pure asymmetrical giving will continue to exist, at least in part because it is appropriate to the nature of some of the problems that the societal commons faces.  For many problems disasters, for example the mere fact that we as a species share a common genome and a common right to human dignity calls out for generosity for its own merit.  There are myriad reasons for giving for giving’s sake.  That a new paradigm is emerging for complex problems with deep roots and global import based on the growing perception of the need for sustained and sustainable investment does not obviate those reasons.

However, the emergence of that new paradigm does require that space be made for it in the world of nonprofit finance.  The new paradigm implies new skills, new relationships, new pathways of accountability, new standards of performance, and new criteria for decision making.  These imply a very, very different kind of culture than in traditional gift-making approaches.

As with any paradigm shift, there is nervousness and even resistance to this new way of looking at the world.  There is, in fact, good cause for such nervousness in the nonprofit world.  In fact, there will be displacement.  In many areas of endeavor, resources will not flow without conditions; philanthropists will no longer simply write checks; information will be expected and even demanded; strategies for philanthropic exits will be required.  This will happen not just for new initiatives or new problems.  It will happen for problems and with organizations that have long been part of the traditional paradigm.  In tandem, new skills will be necessary, and they will bring new people and new educational methods to the sector.  Gradually, these new skills will be expected of a greater and greater number of people in this sector.

This is the reality of paradigmatic shift.  We can meet it with fear or with excitement.  I, for one, think it is tremendously exciting.  Not because paradigm shift in our sector represents revolution, but because it represents evolution.  We as a sector have before us the opportunity to evolve knowledge, skills, methods, sophistication.  We have the opportunity to grow into the change that is all around us.  Evolution is not to be feared.  It is to be embraced because it is the process of becoming better and more effective than we are, and better than we could ever be standing still.

About the Author

Susan Raymond, Ph.D., a Senior Managing Director of Changing Our World, Inc. a leading philanthropic consulting firm, is the co-author of Mapping the New World of American Philanthropy: Causes and Consequences of the Transfer of Wealth, published by Wiley.

She can be reached at sraymond@changingourworld.com.