Springboard Innovation Blog

By Rebecca Robinson, Springboard Media Team Member

Media sage/prophet/futurist/demigod Clay Shirky wrote a piece recently entitled “The Collapse of Complex Business Models.” While it’s ostensibly about the media industry, it’s also reflective of the nonprofit sector’s current state of affairs, and struck me yesterday as strongly resonant with ReVV keynoter Dan Pallotta’s arguments that the sector must change - and be allowed to change - in order to survive.

Shirky starts out by referencing Joseph Tainter’s 1988 book The Collapse of Complex Societies, in which the author examines several societies – the Romans, the Mayans, et al. – that built up complex social structures and advanced technology over time but then suddenly collapsed. Tainter theorized that these societies hadn’t collapsed despite their complexity but rather because of it; they created “huge, interlocking system[s] not readily amenable to change,” and societies whose elites refused to change them because of how such adjustments could imperil their power.

The parallel between Tainter’s conclusions and the current collapse of journalism’s business model is an obvious one, and Shirky gives numerous examples of how media industry executives dismissed opportunities to change their strategies in everything from audience engagement to revenue generation, choosing instead to stick to the 20^th-century status quo. In so doing, they’ve lost viewers, seen their profits plummet, and witnessed the rise of many journalism “experiments” – citizen journalism, online ad partnerships – that they passed on in favor of sticking to the script, as it were.

The less obvious analogy is between the media industry and the nonprofit sector. There are many established organizations and charities that have faltered during the Great Recession, due in part to their reliance on government funding, gifts from wealthy individual donors, large grants from foundations hit hard by the stock market crash, Bernie Madoff’s Ponzi scheme, or all of the above.

But it’s not just the nonprofits who are to blame for their donor dependency. In fact, according to ReVV keynoter Dan Pallotta, it’s the current economic paradigm that castigates charities for pursuing profit, and in so doing created institutional and psychological barriers that keep nonprofits from achieving transformational social change. In Pallotta’s keynote, which drew heavily from his book “Uncharitable: How Restraints on Nonprofits Undermine Their Potential,” no one was spared; the nonprofit sector, the for-profit sector, the advertising industry, and even our Puritan ancestors were all taken to task for their complicity in the creation and/or acceptance of a culture that scorns nonprofits for using the tools of capitalism to eradicate social ills.

Just as Shirky draws parallels between past societies and today’s news industry, so too did Pallotta look to the past for the origins of today’ ingrained and inflexible mindsets.

In his view, the current nonprofit state of affairs is rooted in our Puritan past.

“The Puritans came [to America] for religious reasons, but they also came here to make lots of money,” Pallotta argued. “They were major capitalists; they established the Massachusetts Bay Company.” Their religion of choice was Calvinism, and they believed “that making money would get you sent permanently to Hell. So charity became this economic sanctuary where they could do penance for their profit-making tendencies. They created this other economic world where farmers and traders got the market, and the needy got religion. We’re still stuck with this system today.”

Pallotta painted a profoundly bleak picture of the nonprofit sector’s state of affairs, but also emphasized the potential – indeed, the necessity – for a paradigm shift.

“We need to stop asking the wrong questions and … build a magnificent assessment apparatus,” said Pallotta. He called for a “leadership voice,” and discussed his work-in-progress: collaborating with other organizations and thought leaders to create an International Charity Defense Council, “a charity anti-defamation league, legislative force, and public awareness campaign fighting to change tax codes and create creative ad campaigns” about why ‘overhead’ and profit aren’t the evils people think they are.

Above all, Pallotta appealed to the purest of purposes: “hav[ing] the courage to be true to our dreams.

“None of us got into this work because we were passionate about our lack of profits,” said Pallotta. “We had feelings, we had tears. Something moved us at the level of our heart and soul. If we remember that feeling, and set brave, wild goals, then overhead will go out the window.”

Pallotta’s message is a rallying cry for the enterprising innovators in the nonprofit sector and beyond, imploring people to get back to basics – the dreams that inspired their work – while forging ahead and breaking down dysfunctional systems to create new ones that free them from unnecessary financial restraints.

In light of all this, Shirky’s conclusion seems particularly resonant:

“It is the people who figure out how to work simply in the present, rather than the people who mastered the complexities of the past, who get to say what happens in the future.”