Helping Civil Society Flourish

Forum — Looking Ahead: What Is the Future for the Nonprofit World? (Response by H. Peter Karoff)

The International Journal
of Not-for-Profit Law

Volume 8, Issue 1, November 2005

H. Peter Karoff is the Founder and Chairman of The Philanthropic Initiative,, and the editor of the book Just Money – A Critique of Contemporary American Philanthropy:

While not every critic is a visionary, every visionary is by definition a critic, unsatisfied with the status quo, who aspires to a better world. Pablo Eisenberg is just such a person. His “Looking Ahead” is made more interesting and relevant for all of us because the context and substance for his vision for a better world flows out of what he perceives as the failures of philanthropy and the nonprofit sector. What is that vision? It can be defined with one word – democracy, and more of it! Eisenberg is a Walt Whitman Democrat, like the one we meet in the opening lines of Leaves of Grass:

One self I sing, a single separate person,
Yet utter the word Democratic, the word En Masse!

All of the negative elements that Eisenberg criticizes within the nonprofit field – lack of public accountability and transparency, abuses and (in a few cases) corrupt practices of private foundation trustees and nonprofit managers, lack of oversight by the field and outside regulators, and increasing commercialization – represent a collective drift away from, and violation of, the fundamental “democratic” mission of the sector.

The dramatic and growing gap between the rich and the poor in the United States and around the world is a massive equity issue. Curiously, the same rich-poor issue is reflected in the two tiers of the nonprofit world, which is made up of wealthy institutions and small, struggling organizations. Wouldn’t it be interesting if, following Eisenberg’s suggestion, university endowments, some of which have grown to fabulous levels, were required to fulfill a five percent payout factor? It would be.

I agree with Pablo and his notion of civil society as the defender, advocate, and champion of a level playing field. Some of the changes that he advocates, in fact, are beginning to happen. For example, the Senate Finance Committee will certainly recommend that donor-advised funds make minimum pay-outs. Many of his laments, however, are not being addressed.

What Eisenberg wants is more openness on all levels and a new dimension of influence. It can be compared with the phenomenon that has its roots in the technology world and is called by many names: Open Source, Open Space, and the Flat World, for instance. At its core, it is characterized by an openness and transparency that allows ideas, data, services, products, and markets to flow more seamlessly across an ever-widening and inclusive landscape of participants. That flow is exactly what Eisenberg and others are looking for.

There is a growing movement, for instance, of “cooperative studies,” led by Howard Rheingold at Stanford, that is based on the notion that cooperative arrangements, interdependencies, and collective action in areas such as biology, technology, commerce, sociology, and society are propelling alternative ways of thinking and acting.1 There is a real resonance in these themes with themes of the Open Society, a term that expresses, for Eisenberg and many of us, the way we want the world to be – a world that acknowledges and combines counterintuitive elements and interdependencies. The question for those of us interested in how philanthropy and nonprofit organizations work toward social change and a better world is, What does this phenomenon teach us, and is there an opportunity to rethink the way we do things?

The economics of peer production, of collective action, especially the power of distributed computing, have radically shifted the knowledge-economic equation. The big example, of course, is the Internet, which is owned by no one yet provides the platform for immense economic development and wealth creation, and changes the way we live. Founder Steve Case, who I met in the heady early days of AOL, talked passionately about his vision of how the Internet could become a transformational force for the common good. Pierre Omidyar, founder of eBay, spoke with me more recently about how eBay from inception considered itself a community more than a marketplace. In fact, the Omidyar Foundation changed its name to the Omidyar Network to reflect this interconnectedness. The proliferation of blogs and the increase in web-based political and community organizing are evidence and instruments of what many people believe is a new wave of democratization.

Eric von Hippel, an economist and head of the innovation and entrepreneurship group at MIT’s Sloan School, offers a variation on the Open Source phenomenon-revolution. The leading edge of innovation in manufacturing is increasingly coming from users, not from manufacturers. This represents a huge shift. His examples range from surfboards to kites to surgical equipment. When Lego came out with a new embedded micro-chip product, users went wild and created a free website that quickly advanced the technology far beyond anything Lego had envisioned. The company had three engineers working on the product; all of a sudden there were thousands of “user engineers” conducting what von Hippel calls “personal fabrication.” That Lego had no idea how to respond was not surprising.

Von Hippel envisions “user-centered innovations developed by users transforming processes, business models, and even government policy, with research subsidies and tax-credits to support it.”

The analogue for social policy, philanthropy, and the way nonprofit organizations operate is quite direct. Major foundations more often than not have viewed themselves as the source of innovation, “the manufacturer,” with little if any input from recipient organizations and communities, “the users.” Strategic and Venture Philanthropists likewise often view themselves as crucial to innovation. It is assumed that the nonprofit organization recipients and programs will not, cannot, perform without them. Nonprofit organizations, which are often intermediaries between funders and communities being served, are sometimes guilty of the same patronizing assumptions about constituencies and clients. But for good reason, the trend is away from such centrally controlled assumptions. The potential for social change can only be diminished when the range of creative energy and thinking is narrowed or neglected.

Open Source philanthropy, with its user-centered theme, has become central to a new book I am laboring over, The World We Want. Interviews with a wide range of people – Lucy Bernholz from Blueprint, Pierre Omidyar, Steve Case, Bill Drayton from Ashoka, Elyse Cherry from Boston Community Capital, Steven Melville from the Melville Charitable Trust, Dave Bergholz formerly of the Gund Foundation, Phil Cubeta of the Nautilus Group, Shirley Strong from Project Change, Peggy Dulany from the Synergos Institute, John Abele from Boston Scientific and Argosy Foundation, and Henry Izumizaki from TEAMS – all illustrate, even if the language is somewhat different, von Hippel’s thesis. The leading edge of innovation is on the ground, and it is upstream from the established order. It exists in what the Harvard physicist Lisa Randall calls the extra dimension, the place where genuinely new theoretical developments originate, often in parallel worlds to the established order – a theory of change that may very well fascinate Pablo Eisenberg.

So hang in there, Pablo. These new forms of inclusion and access are democratic to the core. Let’s figure out how to ride them!


1 Howard Rheingold at Stanford is now teaching a course on “cooperative studies,” and some of the references here are taken from his syllabus.