Nina Smith

Review: Uncharitable by Dan Pallotta

Filed By Nina Smith | January 03, 2009 10:00 AM | comments

Filed in: Entertainment, Living
Tags: dan pallotta, Pallotta Teamworks, Uncharitable

"What percentage of my donation goes to the cause?" Isn't that what we're all trained to ask when a charitable organization comes calling for money?

Dan Pallotta's new book, Uncharitable argues that this paradigm needs a shift and he's speaking out about how a for-profit entrepreneurial approach should finally be embraced by the nonprofit sector.

This isn't the first time Pallotta's name has been attached to controversial ideas in the nonprofit world. Most gays and lesbians will recognize his name (or that of his Pallotta TeamWorks) as the organization behind the very first California AIDSRide... you know the one... that grueling week-long bike ride from San Francisco to Los Angeles. It was a first in fundraising when he created this multi-day charitable event that required participants to raise mandatory minimums of two thousand dollars.

Pallotta changed the game for citizen activism. But as the years wore on he was criticized for his business model, his salary and the way Pallotta TeamWorks went to market with its events. I remember reading about the controversy back in 2002 and wondering what all the fuss was about. Why was he being chastised for infusing nonprofit process with winning strategies from the playbook of capitalism? Apparently, begging for donations is supposed to come with a higher calling albeit lower price than peddling a product or service in the for-profit sector. Isn't that a double standard?

At the Huffington Post, Pallotta writes:

We let people make a fortune doing any number of things that will harm the poor, but want to crucify anyone who wants to make money helping them. This sends the top talent coming out of the nation's best business schools directly into the for-profit sector and gives our youth mutually exclusive choices between making a difference and making money. This we call altruism.

We let Apple and Coca-Cola plaster our billboards and television sets with advertising, but we don't want important causes "wasting" money on paid advertising. So the voices of our great causes are muted and consumer products get lopsided access to our attention, twenty-four hours a day. This we call frugality.

Amazon could forego investor returns for six years to build market dominance. But if a charity embarks on a long-term plan with no return for the needy for six years we expect a crucifixion. This we call caring.

We aren't upset when Paramount makes a $200 million movie that flops, but if a $5 million charity walk doesn't make a 75% profit in year one we want the attorney general to investigate. So charities are petrified of exploring new revenue-generating methods and can't develop the powerful learning curves the for-profit sector can. This we call prudence.

We let for-profit companies raise massive capital in the stock market by offering investment returns, but we forbid the payment of a financial return ("profit") in charity. The result? The for-profit sector monopolizes the capital markets while charities are left to beg for donations. This we call philanthropy.

You get the gist. Something is fundamentally wrong with the fundraising model and Pallotta is on a quest to change that: "Uncharitable is a manifesto that puts a new cause on the map - equal economic rights for charity."

Lots of cool people are recommending this book including Sam Page and David Mixner. And of course, in my book, you are cool if Kai Ryssdal invites you onto Marketplace. So if you're looking for something both altruistic and capitalistic to kick off the New Year; buy the book and then start by making a few donations to your favorite charities in 2009 without first considering, "What percentage of my donation goes to the cause?"

That simple action just might change our world!

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When Nina is not reading altruistic/capitalistic books, she can be found blogging about money over at Queercents.


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Anyone who wants to know what the "fuss" was about, has only to google Pallotta under "lawsuits" or "investigations." For instance, they can learn how the Pennsylvania attorney general investigated Pallotta's TeamWorks' bookkeeping after their 1996 AIDS Ride, and required them to cough up another $110,000. He was similarly investigated in Florida, Wisconsin and California.

There's a pretty balanced profile of him at http://money.cnn.com/magazines/fsb/fsb_archive/2002/03/01/319484/index.htm. It goes into the pros and cons of Pallotta's MO, including a number of the investigations and lawsuits.

Pallotta's new message, and his bid to re-invent himself, might not be universally well received today. In my opinion, turning fund-raising into a for-profit business might lead to as many abuses as happened in the past.

Pallotta's new message, and his bid to re-invent himself, might not be universally well received today. In my opinion, turning fund-raising into a for-profit business might lead to as many abuses as happened in the past.

Agreed.

"Amazon could forego investor returns for six years to build market dominance. But if a charity embarks on a long-term plan with no return for the needy for six years we expect a crucifixion."

Yes - the problem with charities is that we expect them to fund the issues they purport to support.

This sounds rather like the executive compensation arguments that have served our industry so well over the last few decades. And like the the fundraising religous folk use on the TV. The mere act of sending money & supporting the the salaries of fundraisers should be enough - 'cause their hearts are pure & some time in the future they'll be some pie in the sky in the bye and bye. (Apologies to Rev. Ike)

It's not a double standard, for profits & charities have different goals. One seeks to maximise profit - one seeks to maximise services to the causes it supports. If we're looking for an area were they both coincide - it's in the need to increase efficiency of their operations to support their goals.

That means productivity for business measured by return on investment and productivity for charities measured by services rendered for money donated.

Foundations already make use of capital markets via their endowments. But the question of overhead has to be considered there as well - just like you would look at fees in a mutual fund and judge them by their returns. Ben Franklin was very concerned over limiting the fees that managers might take when he set up his famous 200 year legacies to Philadelphia & Boston. It's not like there are no mechanisms for supporting long term projects - they've been around since Ben's time at the very least. But the claiming of charity status comes with limitations & expectations.

The other way is a short ride to scamsville.

If you're making a profit - what's to keep any business from claiming non-profit status, not paying taxes, having huge executive compensation & never putting any resources to the causes it purportedly represents?

Ms. Smith,

Interesting article, however I am a bit surprised by your sudden change of views towards business / non-profit ethics, especially since you didn't seem to have an issue awhile back when asking your airline sales crony to engage in "Queer Nepotism" to upgrade your frequent flyer miles without merit:

http://www.queercents.com/2006/11/10/ten-money-questions-for-betty-young/#comment-106605

So where is the "double standard" now ???

Its a shame that a commentor wasn't allowed to express their view as to this issue when this person submitted their comment, but appeared to be deferred by you back to the person interviewed........

Make no mistake about it ladies and gentlemen, non-profits are BUSINESSES these days, plain and simple. They recruit these elitist MBA's, have Boards' of Directors, have groups of lobbyists and have VERY strong ties with corporate America. And let's not forget the GLBT media who tends to engage in protectionism for our community non-profits making the "system" a totally protected cottage industry, overflowing with corruption.

As mentioned above, there have been investigations made, yet how many convictions actually happen due to the legal "loopholes" that non-profits can take advantage of in the legal system. And its funny that groups like HRC and the other powerful non-profits never seem to be investigated. I guess not, since they appear to have their hands in too many pies these days......

So I say this. These days, if we give money to GLBT non-profit organizations, then we also support the very corporations who give these non-profits corporate "sponsorships"(grease their palms), many of which disenfranchise the greater community via discrimination !!!

Don't be fooled by elaborate Black Tie events and HRC galas etc.... chock full of "GL" corporate executives, political activists, lobbyists, non-profit directors and media hot shots, because you can bet that your donation money is going to fund their $100 + plate dinners and the beds that they all lie in.......

Is it really about Queercents or is it in reality about queer sell outs, so that they can get their picture on the next issue of the Advocate while disenfranchising the greater GLBT community...... you know "effortless philanthropy"

Thank you for your time.

Patricia: Thanks for the link to the Fortune Small Business article.

Despite what people think of Dan Pallotta's past, I agree with him that nonprofits would benefit from the way that for-profit companies go to market and run their businesses.

nonprofits would benefit from the way that for-profit companies go to market and run their businesses.

Agreed too. :)

I dunno... I must be missing something. After reading Nina's article and the Fortune Small Business article mentioned by Patricia, I would refuse to donate to any cause associated with Pallotta. Top-heavy organizations such as Pallotta TeamWorks seem like a con to me.

The argument that for-profit organizations spend lots of money on advertising (fundraising) to improve their bottom line, so non-profits should do the same, doesn't wash with me. When we purchase a product from a business we get the satisfaction of using that product. But when we donate money to a charity, the only satisfaction we get is from knowing that money will go to help persons in need. If half (or more) of a donation goes to paying for fundraising, I feel like I am being cheated.

I'm not wealthy enough to pay for a fundraiser's lavish life, although I can understand why Pallotta would want me too.

This sends the top talent coming out of the nation's best business schools directly into the for-profit sector and gives our youth mutually exclusive choices between making a difference and making money.

I don't know... because they are?

But there are plenty of CEO's of nonprofits that make plenty of money, and not just big head honchos like Joe S. Many smaller orgs have XD's who make in the $50K to $150K range. To me, that's making money.

He has a point that we don't criticize people who make obscene amounts of money in the private sector enough. But I don't think that's remedied by letting another sector of the economy completely off the hook.