“smashed,” by Gael.

March 30, 2018; Devex

As a new generation of wealthy corporate leaders turns from their businesses to solving the societal and global problems they see around them, they are fundamentally challenging the role of philanthropy and the nonprofit sector. From education to disaster relief, there is no problem that, they assert, can’t be attacked more effectively by adopting the lessons of corporate success. They saw their innovations as not just improvements, but breakthroughs. Their triumphs came from willingness to risk revolutionary approaches which disrupted existing technologies and markets.

Devex’s recent coverage of the Global Skills & Education Forum illustrates some of the challenges of this approach. Describing from perspective of the educational sector, Lant Pritchett, research director at Research on Improving Systems of Education, told Devex, “In order to lead to transformational improvements, educational technology should be not sustaining technology but disruptive technology, reaching everyone with the kind of education they actually need, and that means going head to head with the education establishments.”

Amy Klement, who leads the philanthropic investment firm Omidyar Network’s education initiative globally, told Devex that “education is one of the few sectors that hasn’t been disrupted for hundreds of years. And the school model—everything from pedagogy to delivery to financing—has been very consistent.” In seeking ways to improve education, they are willing to break current systems; from their perspective, if current approaches to fixing societal problems were effective, the problems would have been solved long ago.

While many nonprofit organizations see their work from a local and personal perspective, the new entrepreneurial thinking looks for ways to respond at scale. Nonprofits are accustomed to being evaluated on their effectiveness in the work they do today; from this new mindset, they’ll find it critical to consider their potential to expand their efforts across a city, state, or nation—even globally. They’ll be judged on their organizational capacity to handle the large investments needed to scale.

In some ways, the very model of a nonprofit organization is being challenged. Rather than seeing a conflict between profit and social mission, the new “philanthropists” see profit as the necessary means for sustainability and scalability. During a panel discussion at the Forum, Jennifer Lee of the venture capital firm Learn Capital noted, “Some people are uncomfortable with the idea of making profit off of students. But what many investors will emphasize is that entrepreneurs behind for-profit education models need to make those margins in order to reinvest and scale to reach more people.”

Mariana Costa, the founder and chief executive officer of Laboratoria, a Peru-based nonprofit, sees the benefits of being self-supporting and adapting to this new ethos. She told Devex, “We’re very clear that we don’t want to live on grants forever. The borderline between nonprofits and for-profits, or impact- or mission-driven for-profits, is becoming more and more blurry, and it’s great to find partners and funders that understand that.”

David Risher, the president and co-founder of Worldreader, a San Francisco-based nonprofit organization that aims to bring digital books to developing countries, described the duality of this challenge to the nonprofit sector:

The growth mindset…is very powerful and it’s unusual in the nonprofit and education space. The ethos that says grow big or go home, and a growth mindset of always learning and experimenting with an eye toward scale, can be quite energizing to the sector.…“Move fast and break things” doesn’t work when it comes to kids’ lives.

Nor does it work when disruption to one system causes negative effects in the larger social environment. Megan Haggerty, coordinator of the International Education Funders Group, told Devex that “whether it is private school or personalized learning, none of these interventions exist in a vacuum, so the question is how they work together on a systemic level to deliver on better education for all….This isn’t just about ensuring those kids going to that particular school are doing well, but does it have any unintended effects on the children’s neighbors or siblings who don’t go to that school?”

The lessons of disruptive innovation, speed, and scale may be important for the nonprofit sector to learn, as the status quo may not hold the best solutions to the large and chronic problems we face. But is the very structure of nonprofit organizations broken and ready to be discarded? In forming LLCs rather than foundations or other forms of traditional nonprofit, as Mark Zuckerberg, Pierre Omidyar, Laurene Powell Jobs, and many others have done, we are losing a valuable level of public oversight and control. In the growth of social benefit corporations and the for-profit investment groups that fund them, we lose a degree of public accountability that rapid and disruptive change requires.

When innovations fail, lives and futures are at risk. While social investors can walk away, as Zuckerberg can from Newark or Gates can from schools affected by his various educational innovations, children and communities cannot. Who will be there to pick up the pieces?—Martin Levine