> If your mission is altruistic, unless your funding model is “impact certificates bought by God,” the structural incentives of your organization are never going to be perfectly aligned with your mission.
Interestingly, I agree with your diagnosis of a lot of the relevant mechanics, but one of my many big conclusions is how important a revenue model tends to be for nonprofits (in addition to being scoped as "Outcome-Shaped Organizations", e.g. https://zachill.substack.com/p/outcome-shaped-organizations)
I fail to see how you avoid profit motive. What people want isn't always what's good for them. What investors want isn't usually what's good for everyone.
In the process of seeking profit to become larger you base your entire business around that. There is no escaping the profit seeking once you are dependent on it. As you scale, there is no point where a business simply says okay we've made enough money, guess we can just stop now. The question becomes not how can we best allocate that money? It becomes: how can we make more money.
Not all research will necessarily equate to financial gain for anyone. What if the research actually would reduce overall earnings? Internally, you have to tell everyone that hey, this is going to come out of our paychecks, but it's for the good of everyone... Maybe.
Not even to mention the obligations to companies you create by the very nature of it all.
Those PBCs mentioned do hardly anything for the public. That you quantify tax free as being richer proves the point that you simply don't understand what being a nonprofit is.
There is no problem with profit motive. This simply means you spend less than you earn.
The problem lies in profit-sharing motive. People who invest because they want to see an immediate financial gain tend to be pretty bad investors.
"Not all research will necessarily equate to financial gain for anyone. What if the research actually would reduce overall earnings?"
Bell Labs says hello. I challenge you to name a single pure non-profit that's achieved as much good for humanity as the inventors of C, transistors, laser, and so on.
To add: ALL RESEARCH AT ALL TIMES, ALL FORMS OF R&D, DEFINITIONALLY REDUCE EARNINGS, because research and development is a COST and EARNINGS is defined as REVENUE, MINUS COSTS.
> If your mission is altruistic, unless your funding model is “impact certificates bought by God,” the structural incentives of your organization are never going to be perfectly aligned with your mission.
😅😅
Interestingly, I agree with your diagnosis of a lot of the relevant mechanics, but one of my many big conclusions is how important a revenue model tends to be for nonprofits (in addition to being scoped as "Outcome-Shaped Organizations", e.g. https://zachill.substack.com/p/outcome-shaped-organizations)
Really enjoyed reading this. It's refreshing to come across content that focuses on creating lasting value. We recently shared an article on why purpose-driven financing is becoming such an important conversation for nonprofits: https://thesemblereview.substack.com/p/the-power-of-purpose-driven-financing?r=8ofna4&utm_campaign=post-expanded-share&utm_medium=post%20viewer
Begging people to realize it's perfectly possible to establish a for-profit C-Corp which in its Articles of Incorporation bans profit-sharing.
Best of both worlds.
Interesting, I didn’t know this!
I fail to see how you avoid profit motive. What people want isn't always what's good for them. What investors want isn't usually what's good for everyone.
In the process of seeking profit to become larger you base your entire business around that. There is no escaping the profit seeking once you are dependent on it. As you scale, there is no point where a business simply says okay we've made enough money, guess we can just stop now. The question becomes not how can we best allocate that money? It becomes: how can we make more money.
Not all research will necessarily equate to financial gain for anyone. What if the research actually would reduce overall earnings? Internally, you have to tell everyone that hey, this is going to come out of our paychecks, but it's for the good of everyone... Maybe.
Not even to mention the obligations to companies you create by the very nature of it all.
Those PBCs mentioned do hardly anything for the public. That you quantify tax free as being richer proves the point that you simply don't understand what being a nonprofit is.
Research is an example they called out as more fit for a nonprofit.
"I fail to see how you avoid profit motive"
There is no problem with profit motive. This simply means you spend less than you earn.
The problem lies in profit-sharing motive. People who invest because they want to see an immediate financial gain tend to be pretty bad investors.
"Not all research will necessarily equate to financial gain for anyone. What if the research actually would reduce overall earnings?"
Bell Labs says hello. I challenge you to name a single pure non-profit that's achieved as much good for humanity as the inventors of C, transistors, laser, and so on.
To add: ALL RESEARCH AT ALL TIMES, ALL FORMS OF R&D, DEFINITIONALLY REDUCE EARNINGS, because research and development is a COST and EARNINGS is defined as REVENUE, MINUS COSTS.