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Use capitalism to do good works

Dan Pallotta, founder and CEO of Pallotta Teamworks

TEXT OF COMMENTARY

Kai Ryssdal:
The bottom line's a dangerous place this year. Lots of scary numbers down there.
But nonprofits that depend on charity are hoping that despite the tight times people and companies are still going to share a little with the most needy. Because as good as it feels to get, it can feel even better to give.

As we wrap up our look at philanthropy this week, a moment now for the groups on the receiving end of your donations. People have been saying for years that nonprofits ought to act more like regular businesses. The ones that do make a profit.

Commentator Dan Pallotta couldn't agree more.


Dan Pallotta:
We let business pay people based on value. But we don't want people making money in charity. Want to make a million as a CEO selling violent video games to kids? Go for it. Want to make a million curing kids of cancer? You're a parasite. So our top business school grads gravitate to the for-profit sector.

We let business advertise until the last dollar no longer produces a penny of value, but we don't want charitable donations spent on advertising. So charities can't build demand for causes. Budweiser's all over the Super Bowl. AIDS and Darfur? Absent.

We let business make mistakes, but expect charity to spend contributions cautiously. It's OK if a $100 million Disney movie flops, but if a $5 million charity walk doesn't show a 75 percent profit year one? Call the attorney general. So charities can't develop learning curves for revenue generation.

Amazon could forego investor returns for six years to build market dominance. But if a charity embarks on a long-term plan with no return for the needy for six years -- we expect a crucifixion. Business can offer profits to attract investment capital. But there's no stock market for charity. So the for-profit sector monopolizes the multi-trillion-dollar capital markets.

No competitive compensation, no advertising, no risk-taking, no long-term vision and no capital markets. A perfect storm of prohibition that puts the nonprofit sector at extreme disadvantage to the for-profit sector. We blame capitalism for the inequities in society, and then refuse to let charity use the tools of capitalism to rectify them.

Maybe capitalism isn't the problem. Maybe the lack of it is. It's been banished from charity by a Puritan ethic of deprivation that considers it contaminating. Maybe an ethic that stands in the way of progress is an ethic whose time is done.

Ryssdal: Dan Pallotta is the author of "Uncharitable: How Restraints on Nonprofits Undermine Their Potential."

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