President's statement: creating an online information marketplace

President’s statement by paul brest

Philanthropists—whether large foundations or small donors—often make grants and gifts based on limitedinformation. This essay explores possibilities for capturing, distributing, and ultimately using better information to makebetter philanthropic decisions.

To frame the discussion, consider the information available to private investors who seek primarily financial returns.Investors can make use of a broad array of data, ranging from reports of quarterly earnings statements to the historical andcurrent prices at which stocks are traded—all based on standards that are consistent across many industries,markets, and countries. They can supplement formal data with the reports of industry analysts and gossip on Web sitesand blogs. Based on this information, investors can put together portfolios that are aligned with their investment horizons and tolerance for risks. And at the end of theday, or quarter, they will know their actual returns.

With due caution about importing concepts from business into the nonprofit sector, it is helpful to think of philanthropic donations as investments that seek a social return.This reflects the hopeful belief that philanthropists want their resources to achieve the greatest impact—the biggest bang for their buck.

Whether or not you are attracted to the metaphor of social returns on investments, if you believe that the goal of philanthropy is to improve the world in some way—increasing the graduation rates of disadvantaged youth, feeding the hungry, or preventing AIDS—then the more you accomplish in a timely manner, the better. And ifyou believe that information about an organization’s performance can usefully guide investment decisions, it is disquieting that philanthropists have access to so little of thekinds of information that private investors rely on.

Money is the measure of financial return, and diverse philanthropic investments do not have a single common measure. But I am not talking about that inevitable distinction,nor about the almost equally inevitable obstacles to attributing particular results to your individual philanthropic dollars.