Giving Compass' Take:

• Joe Lonsdale, writing for Medium, discusses his experience building OpenGov, an online transparency portal that helps governments become more accountable.

• Lonsdale goes on to explain how for-profit philanthropy models can help the nonprofit sector thrive by providing things like access to capital and resources. Where are there opportunities for these two entities to merge?

• Read the Giving Compass Impact Investing Magazine to learn more. 

For most, the word “charity” evokes concepts of altruism and justice completely divorced from considerations of efficiency and profit. The distinction between the spheres of charity and commerce is reflected in the unique legal status accorded to each, and the kinds of people each sector tends to attract.

Many of humanity’s most intractable challenges will only be solved through market-driven innovation. For-profit companies can attract top talent with the promise of equity, engendering a positive feedback loop: as talented people build and scale a business, they can leverage their expanding capital to hire more talented employees. Because the private sector has evolved processes and metrics for growth over many generations, for-profit models are more likely to efficiently accomplish their goals. Finally, viable business models easily attract capital and offer the best chance for systemic, durable solutions to social problems.

It’s true that certain causes require traditional charitable solutions, for instance disaster relief, and helping those in need who cannot help themselves.** Many “collective action,” “tragedy of the commons,” or “market failure” problems are best solved through government or non-profit action. But philanthropists consistently fail to grasp that there is a class of humanitarian projects where innovation is critical, and where solutions should be structured to create economic incentives. Instead of profit or social impact per se, donors should focus on “shared value” — creating economic value in a way that also addresses social needs and challenges.

My experiences building Palantir and running Addepar made me aware of serious problems with government, and inspired me to build a non-profit to look into state spending. Along with a team of several Stanford students, Zac Bookman and I created some of the first online transparency portals, and earned extensive press for our data and insights. We began receiving inbound interest from city officials and policymakers who wanted to compare and contrast their spending in similar ways, yet it was nearly impossible to do this with existing, decades-old systems. In fact, the officials we were working with barely understood their own data.

We quickly realized that not only was this going to be an expensive problem for a non-profit, but that releasing studies and advising the leaders was unlikely to have a scalable impact. Only a for-profit corporation could attract the talent and capital necessary to build the technology solutions to power core government processes around budgeting, operational performance, and transparency. Only this kind of technological platform could scale to hundreds or thousands of governments at once.

We ultimately built a company called OpenGov, which fuses a for-profit model with a mission of making governments more effective and accountable.

OpenGov powers governments across the country with a new “operating system” that enables agencies to make evidence-based decisions that drive better performance and improved outcomes for communities. It frees data currently trapped in complex legacy software and paper records, making the data available for streamlined budgeting, reporting, ad-hoc analysis, and citizen engagement in the cloud.

Because OpenGov delivers a valuable public good as well as upside to stakeholders, it was possible for us to attract a bipartisan group of elite investors, advisors, and board members including John Chambers and Marc Andreessen.

Read the full article about OpenGov by Joe Lonsdale at Medium.