Silly Giving

 In Art, Business, Community, Conference, Culture, Foundations, Fred's Blog, Fred's Blog, Giving, Millennials, Money, Philanthropy, Social Entrepreneurs, Uncategorized, Vocation

The song is so old that you cannot find the lyrics online, but in 1965 “Spider John” Koerner wrote and recorded “Rent Party Rag” on his first solo album. The gist of it was a story about what to do when you don’t have enough money to pay the rent. You get a barrel of beer, lots of food and some music. You tell the musicians, “I’m gonna feed you and let you drink for nothin” and then you are “jumpin’ til the break of dawn.” You charge everyone a little to come, and you have enough left over to pay your rent for the month. So simple!

I’ve been watching the growth of crowdfunding, and it has some of the same feel. In fact, after reading Ben Paynter’s article in Fast Company, “How Will The Rise Of Crowdfunding Reshape How We Give To Charity” it was clear that, in some ways, crowdfunding is the latest version of the rent party. It’s immediate, personal, limited in scope and everyone gets something out of it. As well, it is growing in the same way and for the same reasons Clayton Christensen describes something that is truly “disruptive.”  He writes, “Initially, a disruptive innovation is formed in a niche market that may appear unattractive or inconsequential to industry incumbents, but eventually the new product or idea completely redefines the industry.”

Genuine disruptions do not improve or reform or update. They replace existing products with something that is just good enough initially but over time completely displaces the old options with lower cost and sometimes even better quality. Think about what Uber is doing to the value of taxi medallions in New York City; online colleges and free courses to brick-and-mortar universities; Amazon to J.C. Penney; and Wikipedia to Encyclopedia Britannica. Is it possible that crowdfunding is a true disruption that will change the game or is it just another low cost, trendy and short-lived option to organized philanthropy?

Mark Penn’s book, Microtrends: The Small Forces Behind Tomorrow’s Big Changes makes an interesting observation about small things that become big. All it takes for something to change the game is to capture 1 percent of a market. Mark writes, “The whole idea that there are a few huge trends that determine how America and the world work is breaking down. There are no longer a couple of megaforces sweeping us all along. Instead, America and the world are being pulled apart by an intricate maze of choices, accumulating in ‘microtrends’ – small, under-the-radar forces that can involve as little as 1 percent of the population, but which are powerfully shaping our society. In fact, by the time a trend hits 1 percent, it is ready to spawn a hit movie, best-selling book, or new political movement. The power of individual choice is increasingly influencing politics, religion, entertainment, and even war. In today’s mass societies, it takes only 1 percent of people making a dedicated choice – contrary to the mainstream’s choice – to create a movement that can change the world.”

In 2015, the crowdfunding sector generated $34 billion in cash and, according to Ben Paynter, is on pace to do nearly 10 times that within the next decade. Today, there are more than 3,500 social giving platforms internationally and that number is growing because “most millennials want to see their money make an immediate impact that is tangible and real.” Even though the average GoFundMe campaign raises just $1,500 the cumulative effect is remarkable. GoFundMe expects it will account for $40 billion in giving in the next 10 years, and very little of this will be going to existing non-profit organizations. Instead, the rise of crowdfunding is a reflection of a generation that mistrusts nonprofits and has a compelling interest in relieving the immediate need of an individual rather than contributing to the solution of a larger societal problem. More than 70 percent of all the funds raised are for individuals. Painter writes, “For individuals in need, requests like the few hundred bucks they need to prevent whatever tragic twist of fate is going to screw up life until the next paycheck might have once happened over the back fence or at a block party.” But now, with those traditional in-person social connections being replaced by online relationships we help our neighbors we’ve never even met.

Would it not be ironic that at the very time all we read about is strategic and highly rational philanthropy that is based on data and results that we would be surprised by a microtrend like crowdfunding? While a good friend of mine calls it “silly giving” when compared to the rigorous process he uses for his foundation, it may become too large to discount in a few years. The scale may not compare to the $715 billion in assets of private foundations in America or the $316 billion in private giving but let’s not discount the possibility of a genuine disruption and the power of a microtrend. Yes, there will be abuses by people who figure out how to manipulate our emotions while larger causes and organizations may be affected. But, maybe what a new generation wants is more rent parties.

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Showing 8 comments
  • Michael Howell

    I think what has happened is that foundations that give to Christian cause are in decline due to liberal takeovers after the death of conservative founders. I also think there is great frustration in getting into foundations and so as a natural result people are looking for other options. If you are a young or underfunded ministry it is difficult to get much financial traction to help your cause. If people can’t get the attention and funding they need at the foundation level they will go to the masses. The same holds true for donors as well to a degree.

    • Fred

      Good points, Michael. For most ministries and non-profits it is very difficult to get foundation support. I don’t know if that is a result of their being liberal or not. I think it is more likely to be the difficulty of getting access to the people who make the decisions or being an organization that fits the focus of the foundation. On the whole, getting support from a broad base of people is better – long term – than trying to get larger grants from foundations. Those grants tend to go away after a short time – for all sorts of reasons.

  • Sybil Walker

    This excites me! Maybe this is the generation that will stop looking to Washington to solve local social problems. Maybe they will see needs such as Meals on Wheels and Public Broadcasting will be funded at the community level because people care. You go, Millennials!

  • W Allen Bell

    Gateway Generosity?

    Wondering; How is crowdfunding capturing young workers’ discretionary giving versus ‘ye Olde way” company/civic appeals for a cut of your paycheck to United Way?

    For all the bristling a generation ago about United Way’s shortcomings, many people who own businesses today credit their civic giving and connections to the appeals of United Way. As we keep connecting with affinity groups differently, perhaps your insight is bigger than 1%?

    Personal stories from a friend via social media and streamlined administration ( click, give, receipt via email) is a beautifully simplified gateway to generosity.

  • chris wignall

    Crowdfunding has certainly found a powerful niche. The intimacy and immediacy appeal to many people (especially Millennials I suppose). The drawback is the lack of accountability/transparency. I wonder if a few public failures of the model will undermine what it is doing. This is a time for charities to learn and respond. They should be able to do a better job of reaching people using similar ideals (Kiva for one example, charity:water for another). The danger is that established charities critique the crowdfunding trend instead of learning from it.

    • Fred

      There have already a few failures with people exploiting others with fake appeals but that happens with every form of charity. I would not want to predict the final impact on non-profits but it’s always a good idea to learn from every innovation and challenge to your model. Things move quickly!

  • Fred

    Thank you, Travis, for reading the blog. I love the whole concept of disruptive innovation. It doesn’t just disturb things. It changes the game.

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