Before I managed charitable giving portfolios, I worked—briefly—at a money management firm here in Houston, TX. It was just after the 2008 market crash, and the most important question we had to answer was always, “Can you beat the market?” Unfortunately for the people who stayed at the firm, the answer was no. But I have always considered a vital parallel between the concept known in finance as alpha—the ability of a money manager to outperform market benchmarks—and charitable investment made for social change. Over the last decade of work with Firestarter, an important question always comes up when assessing philanthropic contributions and nonprofit efforts: would we have been better off just giving this money away? In other words, are we capturing social alpha?
While it is much harder to measure social alpha than its financial counterpart, it is vital that we assess this metric for any social investment being made by our clients. When considering our charitable giving as a portfolio of investments, it behooves us to identify initiatives that realize change greater than the sum of its parts. Our Social Alpha blog will continue to explore these ideas, while challenging the standard assumptions underpinning traditional philanthropy and nonprofit management.
This month, we are excited to share some initiatives that we think unquestionably meet high standards of social alpha—where a dollar spent creates more than a dollar’s worth of impact. You will see that we are especially interested in ways that the average person can feel confident in their charity, as opposed to philanthropic endeavors built only for exclusive donor communities.
Change Happens was established by members of the black community in Houston’s third ward over 30 years ago. While many issues facing black Houstonians have been highlighted over the last few months, throughout its history, Change Happens has been fighting systemic racism in its many forms. And unlike many modern organizations that are built around a single, marketable service niche, Change Happens has always been more concerned with understanding the evolving needs of families in third ward than building out its social media following.
The organization is a perfect example of the difference between mission-driven and people-driven organization. Mission-driven organizations are built around a single, easily replicable, often scalable activity. This makes it easy for them to share vanity metrics for fundraising initiatives, but makes it difficult to address the complex needs that inevitably impact people being served. These organizations comprise a segment of the nonprofit industry that thrives on the problem solving, depending on the continual existence of a problem. On the other hand, organizations that are driven by the needs of people and communities are not so easily packaged. Their programs might be spread thin, pulled in several directions to address the intersectional realities of life. Nonetheless, people-driven organizations are indelibly linked to the communities they serve, accountable to individuals, not metrics, and constantly listening before acting.
Change Happens is the quintessential people-driven entity. Their programming spans mentoring for both youths and young fathers, homeless outreach, elderly housing, vocational training support, health navigation, and a litany of initiatives geared towards improving the lives of families living in third ward. I first learned about them when a friend signed up to help mentor troubled youth and discovered that their efforts have literally spanned generations, addressing the needs of so many different people who live in the community. Perhaps most importantly, their staff is comprised of community members, ensuring that there is no gap between service providers and the people being served.
Organizations like Change Happens are the model for activism, service, and community development. They invite people of all backgrounds to play a role in improving a community and direct financial contributions to programs that have been guided by the needs of people—rather than the organization’s survival. Over the last decade especially, corporate models have replaced community infrastructure for a significant portion of the nonprofit landscape, and so it is critical that we recognize the longstanding efforts of organizations like Change Happens.
Plant It Forward Farms makes locally grown organic produce accessible across Southwest Houston. The nonprofit employs refugee farmers who are paid a full living wage—some of whom have gone on to start their own businesses. A grand share, which typically comes with 8-10 varieties of produce, is only $34 a week. We purchased our first batch at the beginning of quarantine, when standing in line at the grocery store became much more tenuous. Now, we drive less than a mile from our house to their SW Houston farm and pick up our share without lines or hassles. After a few weeks of enjoying exceptional produce, easy meal planning, and reduced waste, this feels much less like charity and much more like a good idea.
PIFF is the perfect example of how an equitable exchange can transform realities for people on both sides of the transaction, rather than seeing charity as a traditional one-sides process. When I first started my farm share, I thought that the slightly higher price could be my contribution to hardworking members of the immigrant community. But now, I see economic benefit for myself after each week that I participate. I am much more aware of the exciting seasonally available produce in my fridge, which helps eliminate waste. Plus, I find myself cooking at home far more often and saving money that way, too.
More broadly, we are all watching the consequences of global financial models that are well-adept at capital accumulation for the wealthy but have shown little ability to improve circumstances in our local communities. An economic model that benefits average people and strengthens our local communities depends on an increase in person-to-person financial exchange between neighbors, rather than online accounts. In the long run, buying locally produced fruits and vegetables is as much a self-interested act as it is an effort to support hardworking members of your local community.
As economic circumstances worsen and healthcare costs continue to inflate, we will continue to see close friends find themselves in the challenging position of asking the internet for help. When online crowdfunding platforms began growing in popularity over the last decade, there was a point when I personally felt like they were becoming a net bad. Scammers used the sites to enrich themselves, and the lack of accountability was troublesome to many of us who worked for charitable causes. But now, especially as communities find themselves physically isolated, it seems clear that a different type of accountability is possible through donating directly to people in need.
My $20 online donation to a friend fighting to regain health while staving off bankruptcy can be a powerful tool when multiplied by the capacity of my community. Whereas the crowdfunding model for charitable giving has been used for an array of causes, they seem to be making the biggest impact for individuals struggling to pay medical bills. Of course, it is important to recognize the role that sites like Healthcare Now and Universal Healthcare Action Network can play in organizing around sustainable solutions to those tragic circumstances. But as we wait for the rusted gears of lawmaking to be repaired, we should not underestimate the impact that our small contributions to friends or friends of friends can make within the community.
Our social ties and investments we make in one another carry the most powerful potential to create reliable systems of support. Insofar as online tools can help us invest in those social ties, they are invaluable to the health of our communities. If before I felt like they dehumanize charity, now I see that they allow us recognize connections that can’t be broken.
Firestarter has administered The Opportunity Fund for immigrant access to education since 2017. We offer this as a service to the community without any administrative fee. But we didn’t come up with the idea by ourselves. Community free loan funds are an age-old concept. They come in many different forms and configurations. My favorite is the rotating savings club, in which a group of people rotate giving a pot of their collective money to everyone over time. The first recipient of the funds is essentially getting an interest-free loan, while the last is getting a free savings account. Our education fund, modeled off work The Hebrew Free Loan Association, is a bit different. It maintains a pool of money that is distributed to members of the community when they are in need and refills when those individuals can make repayments.
Contributing to a free loan fund means that you are technically giving financial assistance to a long chain of individuals. Instead of making a one time donation, your money is used year after year to support different families. Of course, over time loan defaults erode some of the funding, but impacts of any contribution are long-lasting, nonetheless.
Our fund is used for education access, which we determined was most important for our community. But anyone can start a loan fund for their own local network, and funds can be distributed to allow for any purposes you deem fit. The best part is that you don’t need to start with a lot of money. Slowly over time, a small group can amass a powerful sum to support members of the community who need a temporary jumpstart.
I was struck some time ago to learn that every religious tradition has limitation on charging interest, and yet those values have been ignored in our current economic model. In the US, average student loan debt is over $30,000. Americans carry an average personal debt of $90,000, and all forms of debt have been on a steady increase since 2000. The damage this causes on individual productivity and personal health cannot be understated. Interest-free alternatives are a vital tool by which we can begin turning back those dangerous levels. Most importantly, they can be mechanisms by which a community binds together to support one another and invest in itself.Let us know if you are interested in starting a free loan fund in your community!