Philanthrocapitalism has caught fire in the past 10 to 15 years as extremely wealthy people have established large, well-funded nonprofits that combat specific social ills. Philanthrocapitalists often take a hands-on role in the work of their nonprofits, which poses a host of challenges and opportunities for the nonprofit leaders who work with them.
Microsoft founder Bill Gates, arguably the world’s wealthiest person, is one of the driving forces in philanthrocapitalism. Gates has pledged to give away more than half of his fortune to solve global economic, health and social problems, and he is challenging other wealthy industrialists, financiers and business people to do the same.
These upstart philanthropists aim to apply innovation, technology and modern management techniques to solving the conundrum of global poverty. Their efforts are having a dramatic impact on the nonprofit community.
Unique challenges of working with philanthrocapitalists
In previous eras, philanthropists’ names may have adorned the organizations and edifices they helped subsidize, but they usually left management of such endeavors to the nonprofit organizations themselves. Today’s philanthrocapitalists are different. They’ve achieved vast wealth by being astute businesspeople, and they like to approach philanthropy in the same manner.
This explains why they often become intimately involved in the operations of their nonprofit organizations. Their rationale is that helping organizations manage themselves more effectively will make their gifts more apt to bear fruit.
Such philanthropists’ efforts often mimic the work of venture capitalists, who usually advise the organizations they invest in. While businesses may be accustomed to such mentoring, many nonprofits are not, so dealing with a philanthrocapitalist often will require a diplomatic approach. It’s essential that both philanthrocapitalists and the organizations benefitting from their largesse set aside egos and sensitivity to “turf.”
Savvy nonprofit leaders recognize that a philanthrocapitalist’s involvement can be a huge boon to their finances and operations. For starters, a massive infusion of capital can go a long way toward building the infrastructure and expertise needed to tackle thorny social ills.
Beyond that, many philanthrocapitalists know how to achieve results quickly, which is valuable in any nonprofit aiming to make a dramatic, positive impact on the world and society. This represents a golden opportunity for nonprofit organizations to make an impact much more quickly than they would without those philanthropic dollars.
However, such a relationship is a two-way street. Just as an organization can grow and learn under the tutelage of a business expert, a nonprofit’s people have a thing or two to teach the philanthrocapitalist about social-services organizations. For starters, a nonprofit’s mission is always central to its identity. That’s a lot different than businesses that can shift their focus as markets dictate.
What’s more, nonprofits and social services organizations are highly relationship-driven rather than systems-driven. People are usually central to the purpose of nonprofits, and that affects how they operate.
This can be a cultural shift for some philanthrocapitalists, especially if they’ve been focused more on spreadsheets and gadgets than on people. That’s why mutual respect is so pivotal to the success of these collaborations.
Criticism of philanthrocapitalism
Some people worry that philanthrocapitalism encourages the unequal social systems that nonprofit groups are usually associated with fighting. It also has been criticized for focusing on a limited range of social problems at the expense of others.
Writing in the Stanford Social Innovation Review, Kavita Ramdas argues that “the same factors that helped create the billionaires may have also exacerbated social injustice and inequality, malnutrition and disempowerment for millions of poor people.” Moreover, capitalists-turned-philanthropists tend to pursue technological, “fix-the-problem” strategies that ignore human complexity and the multifaceted aspects of social problems.
Ramdas and others argue for a “third way” that brings philanthrocapitalists, nonprofit organizations and social-change activists together to work on common concerns. Ultimately, the resources of the former combined with the passion and commitment of the latter are a winning combination — and a pathway to success for any nonprofit organization.
Tags: Business LeadershipLearn More: Click to view related resources.
- "The Birth of Philanthrocapitalism," The Economist
- Anissa Pemberton, "Local Realities of Philanthrocapitalism," Augustana College Digital Commons
- Kavita Ramdas, "Philanthrocapitalism is Not Social Change Philanthropy," Stanford Social Innovation Review