Best TED Talk of 2013

I think Dan Pallotta's TED talk - "A new way to judge nonprofits" is one of the most important talks of this year. Pallotta outlines five ways in which nonprofits are handicapped in their mission to help people.

• Compensation - We have a visceral reaction to the idea of people making a lot of money helping others. Interestingly, we don’t have a visceral reaction to the idea that people should make a lot of money not helping other people. It gives a stark, mutually exclusive choice between doing well for yourself and your family and doing well for world. For example, the average salary for a CEO of a hunger charity is $80K. Meanwhile the average salary for someone with an MBA, after ten years of school, is $400K.
• Adveritsing and marketing - We tell for-profits to spend, spend, spend on advertising but nonprofits are expected not to advertise — unless the advertising space and airtime is donated. People want to see their money spent directly on the needy. But Pallotta points out that money invested in advertising can be returned dramatically amplified. He uses his own initiatives as an example. Over nine years, more than 182,000 people participated in Pallotta’s AIDS Rides and Breast Cancer 3-Day events, raising a cummulative $581 million.
• Taking risks on new revenue ideas - Nonprofits are not allowed to try new things, says Pallotta, because public outcry sounds so quickly at a failure. As Pallotta found by using a different model of spending — experimentation is a big no-no for nonprofits. “Nonprofits are reluctant to attempt any brave, daring new fundraising endeavors, because they’re scared their reputations will be dragged through the mud,” he says. This fear kills innovation. And if nonprofits can’t try new things and grow — how can they possibly tackle problems of the size that our world has?
• Time - On the same note, Pallotta points out that it took Amazon four years to turn a profit. While businesses are given time to build the infrastructure they need, non-profits are not afforded this luxury. “If a non-profit had a dream of building at a magnificent scale, but it would require six years for the money to go to the needy, we would expect a crucifixion,” says Pallotta.
• Profit to attract risk capital - This point is a simple one: nonprofits can’t go after capital, because they can’t be on the stock market. And how do you build scale without capital? Pallotta stresses that the nonprofit sector is at an extreme disadvantage when compared with the for-profit sector. The difference is dramatic. Since 1970, 144 nonprofits have crossed the $50 million annual revenue barrier. In the same amount of the time, an astounding 46,136 for-profit businesses have surpassed that mark. So how did this happen? Pallotta looks to American history for the answer. He shares how the Puritanical spirit saw self-interest as a ticket to hell. But charity was seen as the antidote, a way to do penance. “Financial interest was exiled from the realm of charity,” he says. Today, Pallotta is horrified that only one question is used to evaluate a charity: What percentage of my donation goes to the cause versus overhead?  “It makes us think that overhead is a negative, that it is somehow not a part of ‘the cause,’” he says. “This forces organizations to forego what they need for growth.”