Dan Pallotta: How to Make Charity Pay—Why nonprofits should be allowed to harness the power of capitalism

 

As the creator of memorable and successful charity events such as the California AIDSRide, in which participants biked 575-miles from San Francisco to Los Angeles over seven days, and the Breast Cancer 3-Day Walk, in which participants covered 55 miles over several days, Dan Pallotta has long been recognized as a trailblazer in philanthropic circles. He has raised hundreds of millions of dollars for various causes and brought huge amounts of publicity to any number of issues.

In his groundbreaking new book, Uncharitable: How Restraints on Nonprofits Undermine Their Potential , Pallotta makes the case that the nonprofit sector needs to be deregulated so that it can directly harness the energy of capitalism and the profit motive in pursuit of philanthropy.

Approximately nine minutes, this interview was conducted by Reason Foundation President David Nott and filmed and edited by Alex Manning.

For audio podcast, go here.

For more information on Pallotta, visit his website.

Comments

[R C Dean]

Pallotta makes the case that the nonprofit sector needs to be deregulated

Does he want them to keep their tax exemptions, too?

[Barry Loberfeld]

"What About the Poor?"

[LFB]

It's a good book and one Laissez Faire is stocking.

[jtuf]

For that matter, restrictions on for profit companies hinder charity. Say you have a business and your neighbor is down on his luck. You want to sell him some of your product at below cost to help him out. You can't without being charged with "unfair business practices".

[JW Gacy]

No, RC. He doesn't.

[duelles]

What has Newman's Own done to create a market for charitable products. Granted, His celebrity is the only capital spending or advertising that they had. The same as all celebrity driven programs. But he had a great product - now series of products - to sell at a profit and use for his charity. Smart, and within existing rules.
I could never figure out why one wouldn't just raise $2000 on their own and hand it over. I would never spend 3 days hiking biking , walking. I worked at what I did best and give that money away! Now I don't work. I get to keep it all [what little there is ] for myself.

[Justen]

I don't quite understand the premise. You want... basically for-profit companies who don't pay taxes. I'd love that too! No, back up. What you want is an organization that does not pay taxes, gets money from people based on their emotional position regarding a subject without rendering any substantial service or delivering a product, and potentially makes people very wealthy. What you're looking for is... a religion!

So actually, what I don't understand is what's wrong with running a normal for-profit business to support a social need. You are selling good feelings to people, that's your product. There are lots of people out there who have money and want to feel good about themselves more than they want to have that money. Hell, attach a peripheral product to it if you like - there is a successful business in Arizona that employs the handicapped and sells outrageously priced and inferior household products (40 bucks for a box of plastic wrap, 20 for a lightbulb) along with the fulfillment of giving a handicapped person a job. If you explain your business model to the customer during the pitch many people are happy to go along with it, knowing full well you're making money and they're not getting anything substantial in the bargain. What's the problem?

[Cathy]

The problem with the for-profit companies selling a product in order to raise money is that very little of the money spent goes to charity. For every pink $10 item you buy in a store, only about 1% on average goes to charity. Yet we're generally ok with this.

However, if we ask people to go out and fundraise and in exchange, we'll give them a weekend experience and more than 50% of what they raie will go to charity, it's suddenly bad.

50% is bad, but 1% is ok. Go figure.

The part that Dan doesn't really address but should, is that expenses increase faster than fundraising dollars. Yes, can run a 1 hour walk with 1,000 people with a few donated toilets, water, and volunteers and return 90% to charity. But those 1,000 people raise a small amount of money. When you have 1,000 people raising minimum amounts (like $2,000) and you're supporting them through the process and giving them 2 or 3 days to wlk /ride/participate, there are much larger costs associated BUT the actual dollars that go into the charity's coffers are HUGE in comparison.

Compare what gets raised at a 10km walk for breast cancer vs what gets raised at a 60 mile fundraiser on a per person average. It's outstanding the amount of money that the latter generates, yet it also gets way more flack.

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