Changing the Charitable Paradigm - The Fundamental Inequality

Charitable giving in the United States has been a consistent 2 per cent of GDP for the last 20 years - in current dollars, that’s roughly $300 billion - a year. With the bulk of spending going to religious and educational organizations, charitable organizations working on the most critical needs are struggling. Dan Pallotta argues that a double standard exists between charitable organizations and for profit business that stands in the way of real and positive social change.


Dan Pallotta is the name behind many of the large scale fund raising events for AIDS, breast cancer research and education, and suicide prevention. His charitable event organization launched AIDSRides, Breast Cancer 3-Days, and Out of the Darkness events raised $582 million over nine years.


At the heart of the double standard is the historically reinforced concept that charitable organizations use the money to benefit their causes and minimize overhead expenses like funding raising, salaries, and public relations. Take a quick mental detour to Charity Navigator to see how this has been institutionalized.


Pallotta TeamWorks was an outgrowth of Incrementally larger scale fund raising initiatives – first for the Hunger Project while Pallotta was a student at Harvard, then as organizer for the first California AIDS ride. Just under 500 cyclists tackled the week long ride from San Francisco to Los Angeles, raising over $1 million. His approach was taken from the for-profit playbook: hire the best people, advertise, develop the event venue (logistics), and leverage technology for customer relationship and financial management. All this for a flat percentage of donations that is about the same as credit card swipe fees.


Experience and success gave Pallotta the opportunity to distill the inequities into five major themes:

  • Compensation: The social constraint of overhead seemingly prevents charitable organizations from compensating their leaders and staff. A vow of poverty is the norm.
  • Advertising and marketing: Because these activities are seen as overhead, organizations can’t create demand for donations.
  • Risk taking in pursuit of new donors: If you back away from large scale community fundraisers your forego the learning that comes with experience.
  • Time horizon: Charitable organizations are penalized when a long term goal doesn’t yield immediate results.
  • Profit: Business attracts investment capital – not so for charity.


A deeper discussion on the causes of inequality are in Pallotta’s groundbreaking book, Uncharitable, published in 2008. His TED talk can be found at:


Next week: Pallotta’s formula for success.


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