Thanks for the thoughtful discussion of my article. I am not completely certain we disagree where you think we do, though we probably don't completely see eye to eye.
I am especially intrigued by the challenge you pose with regard to the Pareto Principle, where I suspect I'm fairly out of my depth. The point I was making in my article was that recent years seem to show that an increasing portion of our revenue is provided by a shrinking number of donors, and that if 80 percent of philanthropic dollars come from just 20 percent of donors, that is an indication that there is a strong connection between growth in inequality and in the nonprofit sector - nonprofits were a lot poorer back when wealth was spread more equally (the years of the "Great Compression"), and in recent years as much of the wealth in our country has shifted upwards, nonprofit numbers, salaries and the sector's significance to the economy has also risen.
If I understand your point, you are saying that another way to think of this correlation is that the Pareto Principle us simply a part of how the world is structured. Many disparate phenomena exhibit the 80-20 rule, and nonprofit revenue bases are no exception.
That is probably at best half a gloss on your point, but it is enough that I am intrigued. But, in reply, even if the Pareto Principle is on display in most things, each instance surely has its own cause. All I am saying is that in this case, the cause is the fact that wealth is pooled, and when some people have vastly more than they need to survive, more of this money is available for charitable giving.
It's a conundrum, for justice minded nonprofits. I don't think inequality will be changed ssignificantly in the near future (and I do NOT think nonprofits should be run like businesses). But a sudden new great compression would, likely, put a large number of us out of business. My real point in writing is that I think we need to keep this tension in mind, so that the question of where our bread is buttered does not adversely influence how (and how well) we pursue our missions.
Thanks for responding back. I think a lot of smaller nonprofits feel pressured to try to change the 80-20 rule and I think it's trying to get two similar poles of different magnets to touch. It just isn't going to happen. Given the Pareto Principle's universal application, it just seems like one of those laws of nature that would be hard to overturn.
I think the pressure small nonprofits feel is that if they lose one of their big donors that it automatically means struggle for the organization. And don't get me wrong, it can. But, let's say you lose a $10,000 donor. The answer isn't trying to find another $10,000 donor. The answer is trying to find 10 $1,000 donors. Or better yet, find 20 $500 donors that can double their contribution.
I sometimes think in development, we focus way too much on the top of the donor pyramid and not enough on the lower end. Find new donors and growing them into larger donors over time is a tried and true method to philanthropic sustainability.
I completely agree: putting attention into the middle-tier donors seems to me like it could make a very significant difference. Having a pipeline is part of it, but also, 8 million one dollar donations is much more stable than one eight million dollar one.
You might be right about the Pareto principle; in fact, you probably are in the sense that there will always be a committed core (someone once showed me data to argue that for any claim at all, 19% of people will agree with. It was shockingly persuasive). I guess the question is are we talking about 20% of people making 80% of the gifts, or 20% of the people giving 80% of the money? I do think that you'll always have that core giving most of the gifts, but I am not sure that it will also amount to 80% of the money. I have a new piece coming out in November speculating about the psychological impact of climate change on high-level donors. A growing scarcity mindset in the face of intensifying disasters is a more realistic reason that high-end giving might drop than a new great compression.
It's usually the case where 80% of all the funding is coming from 20% of the givers. Now, we have core supporters that don't give a lot, and they aren't in the 20%, but they are still important. We have to be careful to not only thank our large donors, but we have to thank our long-term donors as well. That is just as important. I can't wait to read what you have to offer next!
I agree with his sentiment, "Social justice nonprofits work for a more just society even as they are entwined with and dependent on an increasingly unjust economic system." A nonprofit should work towards equality for those they serve. Granted, such equality could put them out of business, but I would think that be the ultimate, if unreachable given a less-than-perfect-world, goal in some cases?
Absolutely! Many nonprofits exist due to the fact that there is some type of structural problem in society. Having groups solve these problems is wonderful, but when the problem is solved, many times these groups either have to go away or reinvent themselves to solve other problems. March in Dimes is a perfect example. The group was started in the late 1930s to bring awareness and a cure to childhood polio; with the polio vaccine, the mission of MOD was met. Yet, the reinvented themselves and are now helping by being a leader in maternal and pre-natal health.
Thanks for the thoughtful discussion of my article. I am not completely certain we disagree where you think we do, though we probably don't completely see eye to eye.
I am especially intrigued by the challenge you pose with regard to the Pareto Principle, where I suspect I'm fairly out of my depth. The point I was making in my article was that recent years seem to show that an increasing portion of our revenue is provided by a shrinking number of donors, and that if 80 percent of philanthropic dollars come from just 20 percent of donors, that is an indication that there is a strong connection between growth in inequality and in the nonprofit sector - nonprofits were a lot poorer back when wealth was spread more equally (the years of the "Great Compression"), and in recent years as much of the wealth in our country has shifted upwards, nonprofit numbers, salaries and the sector's significance to the economy has also risen.
If I understand your point, you are saying that another way to think of this correlation is that the Pareto Principle us simply a part of how the world is structured. Many disparate phenomena exhibit the 80-20 rule, and nonprofit revenue bases are no exception.
That is probably at best half a gloss on your point, but it is enough that I am intrigued. But, in reply, even if the Pareto Principle is on display in most things, each instance surely has its own cause. All I am saying is that in this case, the cause is the fact that wealth is pooled, and when some people have vastly more than they need to survive, more of this money is available for charitable giving.
It's a conundrum, for justice minded nonprofits. I don't think inequality will be changed ssignificantly in the near future (and I do NOT think nonprofits should be run like businesses). But a sudden new great compression would, likely, put a large number of us out of business. My real point in writing is that I think we need to keep this tension in mind, so that the question of where our bread is buttered does not adversely influence how (and how well) we pursue our missions.
Thanks for responding back. I think a lot of smaller nonprofits feel pressured to try to change the 80-20 rule and I think it's trying to get two similar poles of different magnets to touch. It just isn't going to happen. Given the Pareto Principle's universal application, it just seems like one of those laws of nature that would be hard to overturn.
I think the pressure small nonprofits feel is that if they lose one of their big donors that it automatically means struggle for the organization. And don't get me wrong, it can. But, let's say you lose a $10,000 donor. The answer isn't trying to find another $10,000 donor. The answer is trying to find 10 $1,000 donors. Or better yet, find 20 $500 donors that can double their contribution.
I sometimes think in development, we focus way too much on the top of the donor pyramid and not enough on the lower end. Find new donors and growing them into larger donors over time is a tried and true method to philanthropic sustainability.
I completely agree: putting attention into the middle-tier donors seems to me like it could make a very significant difference. Having a pipeline is part of it, but also, 8 million one dollar donations is much more stable than one eight million dollar one.
You might be right about the Pareto principle; in fact, you probably are in the sense that there will always be a committed core (someone once showed me data to argue that for any claim at all, 19% of people will agree with. It was shockingly persuasive). I guess the question is are we talking about 20% of people making 80% of the gifts, or 20% of the people giving 80% of the money? I do think that you'll always have that core giving most of the gifts, but I am not sure that it will also amount to 80% of the money. I have a new piece coming out in November speculating about the psychological impact of climate change on high-level donors. A growing scarcity mindset in the face of intensifying disasters is a more realistic reason that high-end giving might drop than a new great compression.
It's usually the case where 80% of all the funding is coming from 20% of the givers. Now, we have core supporters that don't give a lot, and they aren't in the 20%, but they are still important. We have to be careful to not only thank our large donors, but we have to thank our long-term donors as well. That is just as important. I can't wait to read what you have to offer next!
I agree with his sentiment, "Social justice nonprofits work for a more just society even as they are entwined with and dependent on an increasingly unjust economic system." A nonprofit should work towards equality for those they serve. Granted, such equality could put them out of business, but I would think that be the ultimate, if unreachable given a less-than-perfect-world, goal in some cases?
Absolutely! Many nonprofits exist due to the fact that there is some type of structural problem in society. Having groups solve these problems is wonderful, but when the problem is solved, many times these groups either have to go away or reinvent themselves to solve other problems. March in Dimes is a perfect example. The group was started in the late 1930s to bring awareness and a cure to childhood polio; with the polio vaccine, the mission of MOD was met. Yet, the reinvented themselves and are now helping by being a leader in maternal and pre-natal health.