1 --------------------------------------------x UNION SQUARE VENTURES SESSIONS EVENT: HACKING PHILANTHROPY --------------------------------------------x September 25, 2007 11:30 a.m. Columbia University Italian Academy 1161 Amsterdam Avenue New York, New York ROSENBERG & ASSOCIATES, INC. Certified Court Reporters & Videographers 575 Madison Avenue, Suite 1006 New York, New York 10022 (212) 868-1936 www.rosenbergandassociates.com 2 A P P E A R A N C E S: BRAD BURNHAM SCOTT HEIFERMAN CHARLES BEST LESLIE CRUTCHIELD GRAHAM HILL JOHN JOHNSON MEGAN CASEY AMI DAR JONATHAN SOROS SAUL GRIFFITH TOM REIS CRAIG NEWMARK BRIAN TRELSTAD SEBASTIAN TRAEGER TOM COHEN SUSHMITA GHOSH FRED WILSON ANIL DASH TOM WATSON KEN GROUF CASANDRA RYAN JONAH PERETTI BOB YOUNG DAVID GALIEL JEFFREY WALKER DICK COSTOLO RAY CHAMBERS JEFF WEINER PETER SEMMELHACK PREMAL SHAH JAMIE DAVES VICKI SAUNDERS PHIL CUTTER ALBERT WENGER MARTY KEARNS JASON KNIGHT TERRY KELLOG VICTORIA VRANA JAY GODSALL JASEN PAEZ ANDREW PARKER ANDREW RASIEJ MERRILL BROWN JOHN GOLDSTEIN SCOTT ANDERSON 3 A P P E A R A N C E S (CONT.): MARVIN VARSAVSKY MICAH SIFREY ROBERT M. LEVINE, Court Reporter 4 MR. BURNHAM: It is going to be important to be able to have everybody kind of quiet down because we're not going to use mics. And we want to make sure that everybody can be heard. So it's also going to be important for people for speak up. So, I suppose I should introduce myself. I'm Brad Burnham. I'm one of the partners at Union Square Ventures. Thank you all for coming. This is the third of these sessions, events that we've done. We did one at Pier Productions, which I think you'll find is related to the conversations we had today. We did one on technology and public policy which again is related to the conversation we had today. Today we want to talk about, the title of this session today is Hacking Philanthropy, which we have Jeff who introduced me to the term. There is an asterisk next to hacking for those of you who aren't from the tech community. It's meant as a term of respect. It's something that is great to talk about. Of being a very 5 insightful way of solving a very difficult problem with great efficiency. And that's the way we want to talk about technology philanthropy today. The first and the most important, this is a conversation. There are no presentations. Nobody is going to make a speech or sit on a panel. Every one of you is, I hope, going to contribute to the conversation. And what we've done in the past is we've had these conversations. We've put the conversations up on the Web as a transcript. And Robert over here is transcribing. In order for him to be able to deal with this, I know he's probably going to be tearing his hair out because there's a large number of people, he's trying to get everybody's name. We would like the transcription to reflect everyone's contributions as accurately as possible. Again, speak clearly and a little bit slowly. If we can all give the speaker the courtesy of trying to remain quiet so we can pick that up, that would be great. 6 So because we're going to put the transcript on the Web, please don't break any corporate stories. This is not meant to be, you know, it will not be secret. So make your contribution with the understanding that it will go up on the Web. So, how is this day going to be organized. First of all, when we put together this conversation we wanted to talk about, you know, what we understood to be happening in the world of technology and how it might have an impact on social action and philanthropy. And we know that there's a lot of great work going on in the area of politics. And you know, Scott, the founder of Meetup came to light early on in the Dean campaign and runs The Personal Democracy Forum. And there's a great conversation already going on out there about the relationship between technology and politics. And so we wanted to focus, instead, on just the relationship, the opportunity with technology and specifically with Web technologies and philanthropy. And 7 what we think of as positive social action. There are a couple of reasons for that. It's the fact that that conversation which haven't heard as loudly, but also because we're capitalists. We're venture capitalists, but we're capitalists. We believe in markets. And we believe that there's an opportunity within markets to do something really creative in the philanthropy space. As a starting point, what I'd like to do is have everybody quickly go around, introduce themselves. We did put up bios on the Web. Not all of those bios were complete. We just put up what we could find. So I'm sure that there's more to tell for most of you. Like to do it is as quickly as we can because just think about the number of people around the table. A minute each. Because we're going to be halfway to lunch or most of the way to lunch. So I'd like to try to just keep it very brief. After we do the intros, we have structured the day with a conversation 8 initially about the nature of lightweight Web services. What they are. How they work. What engine drives them. Where the efficiencies come from. And, again, we're coming from the dot-com side. That's our experience. And the opportunity I hear today is to think about how they might create some value in the dot-org side. Then we're going to break for lunch. We have a special treat for lunch. Maya Lin has agreed to come in and present the latest and I guess last memorial that she's going to work on. It's titled, "Missing." It's a reminder that technology can have an impact on positive social change. Art can also have an impact on positive social change. And she describes what she's doing. You'll see that there's also a convergence between art and technology in what she's trying to do. And I think that will be fun. After lunch we want to come back and talk about exactly how to apply some of the things that we're learning in Web services to the not for profit and the 9 philanthropic side, market the opportunity. Then we want to talk a little bit about the constraints. Not everyone in the world has a computer. How do we solve problems in situations where there's not an infrastructure. How do we take advantage of the limited infrastructure that exists. How do we get leverage out of the limited infrastructures. And, finally, we want to wrap up with kind of a brainstorming session about what the world would look like five, ten years out. If we believe that there's not only a more integrated use of technology, but also an accelerated convergence of the dot-com and the dot-org world. And we'll, I hope, talk a little bit about that today. Hope that everybody will be able to keep their cell phones off while we're around the table. If you do need to take a call or to step out, do that. If you need anything from Dorsey over here, you know, transportation, or if you'd like her to hold your phones, receive a call for you or 10 something, please just do that. Bathrooms if you haven't already found them are all the way downstairs. This stairway. And that's it. Let's go ahead and get started with introductions. My quick introduction is Brad Burnham. Partner, Union Square Ventures. Early stage venture fund focused on Web services that have the potential to change the structure of markets. Let's go to Scott. MR. HEIFERMAN: All right. Hi everyone. I'm Scott Heiferman. As he said I'm the CEO of Meetup. I'm in Year 5 of a 20-year project. Have been involved in local community groups everywhere about most everything that forms the 21st Century, multi-chapter organization that exists. MR. BEST: Charles Best from DonorsChoose.org which is a website where public school teachers can be social entrepeneurs and any citizen can be a philanthropist. Essentially, a site, a philanthropic eBay where teachers post 11 classroom projects that need funding and donors choose one that they want to support. MR. HILL: Graham Hill. Most recent project, founded Treehugger.com which I sold a month ago to Discovery. Work with them for a while. MR. JOHNSON: John Johnson. Founded EyeBeam.org, a nonprofit. An arts and technology nonprofit. Co-founder of Bees Feed. And just recently started a philanthropic foundation, civic foundation which is funding innovation in art and the environment and social justice. MS. CASEY: Megan Casey with Squidoo. Basically what Blue does is we make it easy and free for people to spread the word about something that we care about, blogging. It's a lighter weight structure for them to rip on things that they care about. Things that they want to get the word out about. And while it's free to set up, they do earn royalties from various ways of participation. And we encourage them at every stop of the way to donate to some of our partner 12 nonprofits. MR. DAR: Ami Dar. I run Idealist.org. It's a global nonprofit. It matches nonprofits with people all over the world who want to work with them, volunteer with them. We've been doing this since '91. Note the gray they're. MR. GRIFFITH: Saul Griffith, technology guy. I write science education books for children. I work in projects and spy glasses, building the supplies on laptop and working. MR. REIS: Good morning. Tom Reis. I'm the director of innovation and design to the Kellogg Foundation. Kellogg Foundation is one of the old mainstay large foundations in this country that has potential for becoming a dinosaur. And my job is to make sure that doesn't happen. MR. TRELSTAD: Brian Trelstad. I'm the chief investment officer of Acumen Fund, a social investment fund that invests in Southeast Asia and East Africa. Was on the founding team of a Web 2.0 called Get 13 Active which does management for nonprofits. MR. TRAEGER: Sebastian Traeger. I'm heading up a venture called Razoo.com. We're a social network around social good. And our goal is to act straight and encourage people by making our tools easy and fun and meaningful to get people involved. So that's what we're doing. MR. COHEN: Tom Cohen, PTC Advisors. I focus mainly on helping entrepeneurs get financing for early stage companies. MR. WILSON: I'm Fred Wilson. I'm Brad's partner. And really enthusiastic about this particular subject. Because it's been something that's near and dear to my heart for a long time. And I think there's a lot of good stuff happening. MR. WATSON: Tom Watson. I'm co-founder of Changing Our World, a philanthropic services company. I also publish a website called OnPhilanthropy.com which covers philanthropy. And I work particularly a lot in sort of the confluence 14 of media technology philanthropy. And how not for profits can adapt and adopt media and networks, both to raise money and also to raise friends. MR. GROUF: I'm Ken Grouf. I'm the co-founder of the iNew York which is an Americore program which gives young people between the ages of 17 and 24 a chance to do a year of full-time community service. Before that I spent six years as a director at Yahoo. MR. PERETTI: I'm Jonah Peretti. I'm the co-founder of BuzzFeed which is the platform for amplifying online buzz, helping people find interesting things. And also co-founder of the HuffingtonPost, a news and opinion site. MR. YOUNG: I'm Bob Young. I'm better known as the co-founder of RedHat and formerly CEO. After I left Red Hat I did philanthropy for a couple of years. And I learned everything I didn't want to know about philanthropy. So I went back to work. And being an Adam Smith disciple, I'm 15 convinced that the businesses I'm building will create more value than the philanthropic project I was involved in. And I'm interested in you guys convincing me otherwise. MR. GALIEL: I'm David Galiel, executive director of Public Entertainment Corporation or PiCorp. And we're a nonprofit digital entertainment studio. And my goal is to prove that fun is socially constructive and not mutually exclusive. And that educational and high production values are not mutually exclusive terms. And I also consult with federal, state, local agencies on adopting lightweight Web applications. MR. COSTOLO: Dick Costolo. I was the co-founder and CEO of FeedBurner, a media distribution platform and a former Union Square Venture reality port. MR. WALKER: Jeff Walker. I started JPMorgan Partners now called CCMP Capital. Heavily involved in nonprofits, particularly one we started seven years ago called Empower. It does back-office support 16 and programing for nonprofits. We have 450 here in the city. And we've just gone national for the city. MR. CHAMBERS: With the Amelior Foundation. MR. WEINER: Jeff Weiner, executive vice president of Yahoo. In that position I oversee all of Yahoo's consumer base products. In addition to the fact that Yahoo is a tremendous platform to support some of the efforts here, also have a personal interest in helping out in improving the education system. And have had a great honor to be able to work closely with Charles on some of the DonorsChoose stuff. And a little bit with Ray on some of the stuff impacting all this stuff. MR. SEMMELHACK: CEO of Bug Labs which is a USV portfolio company. We are building a consumer electronics platform that will allow virtually anybody to assemble whatever electronic gadget they want. Kind of like 17 Legos. For enabling all kinds of communities to explore new types of devices and applications. MR. SHAH: I'm Premal Shah. I'm with Kiva.org which is a relatively new website that let's anyone with an Internet connection and a credit card make a micro loan to someone in the developing world. We just crossed about 120,000 Internet lenders. Made loans to entrepeneurs in about 40 countries. Growing quite fast. There's a lot of risk on the platform as well. MR. DAVES: Jaime Daves is a partners firm in New York. Focused on the media and entertainment scenarios. Also a co-founder of a philanthropic forum called Full Circle Fund which is basically the area. It's terrific to see so many national service alumni here. It's a transition to that. MS. SAUNDERS: I'm Vicki Saunders from ImpactaNation. And five weeks away from launching another company called Sing, a for profit, which is a shared platform for social forces to track and aggregate the mechanics, 18 skinable by any organization. MR. CUTTER: I'm Phil Cutter. And I apologize for the cell phone. I've shut it off. It won't happen again. I'm the chairman of the board of directors of Goldhirsh Foundation. In the past three years we've moved more into the social entreneurship area. I'm here to learn. MR. WENGER: Albert Wenger. I'm an early stage investor. I've been involved in some Web 2 which are lightweight Web services. I'm also an investor on the board of Etsy which is an onboard market based. MR. KEARNS: I'm Marty Kearns. I'm a founder of NetTreeCentric companies. We apply network to social changes and advocacy efforts. Our current project is Media.org which is using mass distributed volunteers to do research, develop a database of media databases. MR. KNIGHT: I'm Jason Knight, co-founder and CEO of Wesabe which is a Union Square portfolio company. We're a service that helps our members make better decisions 19 with their money. So they upload all of their financial data. And then in a pier produced manner, share where people can get more value. The one thing I guess I'd like to take away from this is I'd be interested in the thinking of the people in this room on ways that people could spend their money and get more value and do more social good. That's something we'll be very interested in. MR. KELLOG: Terry Kellog. I run an organization called One Percent For The Planet. It's a movement and getting more funding into the environmental world from companies that commit at least 1 percent of their revenues to causes. It was co-founded by Patagonia. And we currently have more than 700 member companies in 25 different countries around the world. MS. VRANA: I'm Victoria Vrana. I'm with Venture Philanthropy Partners. And we bring over 50 investor families together to invest philanthropically in great nonprofit leaders in the D.C. region to help 20 them make their organization stronger and have a greater impact on their communities. MR. GODSALL: I'm Jay Godsall. We're venture capitalists. We recently created a technology Pathogen. So my focus is try to get pretty expensive stuff into slums. So we're developing a social initiative to try to figure out places that are very rich in pathogens, but not very much in money. MR. PAEZ: My name is Jasen Paez. I'm founder and CEO 4APurpose. We're a technology media company focused on what we see, a burgeoning zone throughout the country; particularly young people. We have two primary projects we're focused on right now. One is called Party4APurpose.com which is an effort to create a single free platform for every event, charity purpose of any kind anywhere in the world. And we're also working, we're creators of a couple of different shows starting to make their rounds in Hollywood to 21 bring charitable lifestyles, purposeful lifestyles, and the fun of engagement and support which you care about to television more aggressively. MR. PARKER: I'm Andrew Parker. I'm an analyst at Union Square Ventures. I also previously worked as a developer on an open source platform for online deliberation commonly used for organizing social action. MR. RASIEJ: I'm Andrew Rasiej. I'm the founder of Mouse which is a nonprofit I started here in Silicon Valley ten years ago that focuses on training students to be the network administrators in repairing/fixing their computers in inner schools. Now in a hundred schools in New York. About to expand to 300. We're also in eight states and 20 countries around the world. 95 percent of the kids in our program graduate and go to college. I'm also the founder of Personal Democracy. Follow politics and technology and a pending website called Tech President which focuses on how presidential candidates 22 are using the Web and how the Web is using them. And, lastly, I'm the senior technology advisor for the Sunlight Foundation which is a foundation started two years ago in Washington that's focused on putting massive amounts of government data online so that Americans can parse it, to mash it, smash it, and keep their, hold their members of Congress accountable. MR. BROWN: I'm Merrill Brown. I'm a digital media executive and now consultant. I was the founder of NBC.com. Today I run an initiative on the future of journalism funded by the Carnegie-Knight Foundation involving Columbia, Berkeley, USC, Harvard, Northwestern. And I'm chairman of the board of a company called Now Public which wants to be the largest aggregator in the world. And I'm an advisor to Agave, a company run by two entrepeneurs who want to use the Web to help empower people to contribute to social causes. 23 MR. GOLDSTEIN: My name is John Goldstein. I'm with Google.org. And I'm on the investment side. (John's opinions are not the opinions of Google.org) MR. ANDERSON: I'm Scott Anderson. I'm the newly appointed VP of global involvement for Ashoka. And for 15 years I did strategic at the Nature Conservancy. And I also write the Green Skeptic website. MR. BURNHAM: We skipped you, your introduction. MS. CRUTCHFIELD: I'm so glad to meet Scott, my new colleague. I'm Leslie Crutchfield. And we're here wearing a couple of different hats. I'm the managing director of a global academy for social entrepeneurship. It's a new program where we elect global great entrepeneurship, such as Mohammed Unis for scaled impact to great international levels and holding them up as incons for the people. I also consult with Phil Cutter of the foundation, helping them to build up their social entrepeneurship portfolio. 24 And I think the reason I'm here is my good friend Brian Trelstad is helping me write a book that's coming out next month. It's called Forces For Good. The six practices of my impact nonprofits helped to develop the methodology which is great for nonprofits to help us understand how to have maximum impact through the social sector. And I'm curious to learn here about how those social sector leaders and philanthropies can have impact, do their work. MR. BURNHAM: Well, thank you all for coming. We are, I am at least awed and intimidated by this group. We've spent a lot of time at Ventures thinking about leverage in a very positive sense, technology leverage in the commercial world. And we really look forward to thinking about how it might apply to the nonprofit world. To start the conversation today what I think I'd like to do is try and get a sense of what the nature of leverage is on the Web. And in the invitation that we sent out, I pointed to an example of Craigslist. 25 I do think that Craig will join at one point. So he'll have a chance to rebutt this. But Craigslist is a phenomenal institution. They are in 450 markets in 150 countries. They're the seventh largest site in the English language on the Web. They have something -- and I'll get these numbers wrong -- Craig will correct them. 20 million uniques. 18 million posts every month. And they run this business with 24 people. So Craig at one point published an employee per. I don't know whether it's unique user, Jeff, or there was. And he compared all of the major important terminals. And Craigslist was so far and away off in their own world. And maybe I'll just turn to Scott because you're also very involved in creating a highly leveraged business. And ask you to comment on how that works. MR. HEIFERMAN: Well, the keyword, I think. Thank you for putting me on platform. Keyword that we use at Meetup to describe what we're doing which we realize 26 is actually about, I think what a lot of the discussion is the notion of self-organizing, self-organizing systems. You know, I think Craig's great innovation was just like Pierre's great innovation about the user rating. That he said we didn't have the resources. We were too lazy to want to answer everyone's questions. We set it up so that people can rate each other and help each other. Craig's system was how things were flagged. Means that the system can, you know, solve problems. So it's not just self-organizing. The last thing I'll say on this leverage point is that it's not just the self-organizing systems on Web's buzzword people call crowd sourcing. Meaning like, you know, people just by doing their own thing, solve something like flag, a bad post on Craigslist. But what I believe is that what's really fascinating is when people more consciously self-organize the way they do on Wikipedia. And the way, you know, 27 self-organizing groups have always changed the world. You might think that it's all up to a charismatic leader of an MLK. But, in fact, it's the thousands of small groups around the country that created the civil rights movement and the women's rights movement was about thousands of small groups. And I don't mean to be plugging my mission about self-organized groups. But it is an engine paradigm. A general concept of how leverage, how technology can leverage self-organized systems emergence and groups in interesting ways to make. Because, last sentence, I promise, self-organized systems is about decentralization. So the 20 people sitting next to Craig's office is a highly decentralized system. And so it's thinking about these mechanisms that in a noncentralized way is where the leverage comes from. MR. BURNHAM: I like to stay on the dot-com. MR. HEIFERMAN: Like the 28 Internet. MR. BURNHAM: Like to stay on the dot-com for a while and talk about another phenomenon. And that is open source software. Going to give Bob a warning that I'm coming to him. Bob was involved in the creation of a business called Red Hat which commercialized the efforts of some very large number of people who created in a self-organizing way, an operating system which is now used to run a very large portion of the Web. And {maybe|may be} Bob has a better handle on some of society statistics of what Linux actually does and how it was created. And whether we can learn anything from that mechanism. MR. YOUNG: Actually, yes. It's actually not a bad segue. Because your comment about Craig and his 20 guys empowering 20 million unique visitors is very similar. Red Hat started winning. We won seven Info World Product Of The Year awards in a row in server operating systems. So our 29 competition was IBM. It was Sun Microsystems. Novell Corporation. Of course, Microsoft. All of whom were multi-billion a year companies. And we started winning these awards when there were 35 of us working in the tobacco fields of North Carolina. So it was positioned by Info World as a David versus Goliath. This is remarkable. Until you stopped and realized that it was actually the reverse. We were the Goliath. Because we had more engineers working on our operating system than even Microsoft could afford to employ themselves. So it was a form of barter economy. The engineers contributed to our operating system because we gave away all of our code. They gave way all of their code. They received a benefit for building Internet drivers. We received a benefit from that Internet driver until we gave them back a gigabyte worth of multi-user, multi-tasking operating system with complete source code. And a license to do whatever you want with 30 it. So they saw us as a partner in the development of these technologies. Again, the Internet is the unique innovation that enabled this to happen. Without the Internet we couldn't have harnessed this worldwide group of engineers. With the Internet it simply is a question of rethinking how software's developed and what the incentives are to the engineers who develop them. MR. BURNHAM: Something that Red Hat did that in our business we pay a lot of attention to is they changed the structure of the operating system market. They were able to come after that market with a higher quality product than could have been produced by a commercial enterprise. And Charles is in the process of changing the structure of the philanthropy business, using some of the same infrastructure and platforms that enabled the production of Red Hat's product or of Scott's. Talk a little bit about that work. MR. BEST: Sure. Well, I think 31 the ideas that we push production to the front end-user in a way that makes them feel like they are partners with us. So that starts with front line classroom teachers being the ones to come up with the micro solutions that will most help their students. And we actually see that these teachers come up with ideas that are far more innovative and creative than any top-down program would be. And we turn to those teachers to help screen and authenticate proposals submitted by teachers in other regions. We turn to the students who benefited to describe the impact of the project rather than having a staff person go in and record things. I think in every area we grab every opportunity to get the front end-users to do the work. And the result is our impact reports that are far more vivid than an expert might come up with. Micro solutions that are better targeted and more innovative than the top-down program. 32 And then we have donors who do the labor of choosing which ideas ought to be brought to life and were built on Red Hat Linux. MR. WILSON: Fred, you know, what was interesting to me, listening to this, it certainly is about the technology. As Bob says, you couldn't do it without the technology. But it's also about a mindset that's a fundamentally different mindset. Instead of the command and control mindset where an organization decides how their services are going to be delivered. It reminds me of the conflicts that Peter and Jeff Walker and I were having about Bud Labs. And the question Jeff was saying, what devices are you going to make. And the answer is we're not going to make any devices. We're going to let anybody make a device. And the same thing, we're going to let any teacher conceive of a program. We're going to let any group of people create a community organization. We're going to let anybody write an Ethernet driver. And that's 33 a mindset that is fundamentally at odds with the sort of command and control mindset that most organizations have had for hundreds of years. MR. YOUNG: Except, isn't it basically our free market model versus the Russian, the old Soviet centralized planning model? MR. WILSON: But I think most organizations, whether it be the Ford Foundation or IBM, did not have the global Internet at their disposal when they were created to deliver whatever services. And so they had to use a different approach. MR. YOUNG: They didn't internally. But as a society, all the IBMs and the GEs and all of those guys put together did, if you think about it. MR. WILSON: So why didn't -- so why wasn't this approach -- go back. MR. YOUNG: Because without the technology, what the Internet is is simply the first time that everyone on the planet can talk to everyone else on the planet 34 without an intermediary. And that's the unique innovation of the Internet. And so, suddenly, particularly for philanthropy, you don't have to find the guy who's already amassed all the wealth and get him to give you money. You can with MoveOn.org type approaches get all the individuals themselves to fork over their dollar each and that turns out to be more money than Bill Gates can come up with. MR. BURNHAM: Bob, you're touching on something that I think is important though. And you said that isn't this just a market working. But there's also, there's work done on the theory of the firm by this guy (Coase) comes in 1937 which described the reason why we have economic units called companies. Because of the cost of operating a market within those communities is greater than the efficiency. It's more efficient to actually have a command and control hierarchy within the community. And then there's a market that links those entities together. 35 And what's interesting is what I think is happening now, and what I think Craigslist shows us and Meetup shows us, that the Internet is reducing the transactions costs of organizing markets, to the standpoint that those communities are much smaller and much more self-organizing than they were in 1937. MR. YOUNG: How do you explain Google? MR. BURNHAM: How do I explain Google? MR. YOUNG: My argument being that Google is the guys who are becoming the Microsoft of the Internet. MR. BURNHAM: Okay. So why has Google been -- so you're saying that you think there is a natural economy of scale on the Web, as well as the traditional economies of scale that are more manufacturing. MR. YOUNG: I'm just posing the question. I don't have a good answer. MR. HEIFERMAN: I think your point is right on. The basic notion of a 36 free market is self-organized system. And that tends to crate some amazing things, like the Internet or whatever else. Like medicines and the good things that's come out of capitalism. And that's what's at play. The idea of a foundation for self-organized human activity. And, you know, to let the interesting stuff rise up, that is a good analogy. MR. WEINER: Practically speaking, one question or challenge I would pose for the group is how we help in a sense organize the self-organization of the people around this table. To go back to your point about scale, I think when you're thinking about scale, self-organization components that we talked about earlier are largely based on community connecting people. And that's one part of what makes, in a sense, the staff, the people around the table participate in it go. I think looking, spending some time with Charles and DonorsChoose, 37 understanding that model, I think Charles would be the first to say fulfillment is the mechanism by which you fulfill the match-making. It's absolutely essential. And scaling that, having spent time in the search industry, you guys were just talking about Google as well. Relevancy. And scaling the ability to make a match. You know every time somebody goes into a query box, whether it's on Charles' site, whether it's eBay, if those sites are not producing enough liquidity so people can find something they're interested in in donating to, they're not necessarily going to come back to the site. One of the questions I have, to me, this notion of organization, decentralized organization, self-reorganization. They're not necessarily mutually exclusive. And I think massive scale benefits, if we can start to help this along, potentially through some open source. So that rather than have a fragmented splintered 38 approach to this where we have various sites, and it's amazing to see the firepower assembled around the table today, imagine if they were pulling in a similar direction, not on everything, but on the stuff that helps make this scale much faster than we could otherwise imagine. So imagine if there was a commitment to an open source platform for any kind of marketplace approach, philanthropic efforts. So that engineers and developers from around the world could be contributing applications to this platform to better connect people, to better improve the search relevancy, to improve liquidity. I think that would help jump-start a lot of the things we're talking about. MR. DAR: Two things. On the one thing is forgotten now Craig started in '95 in San Francisco. From '95 to 2000 was one city. Made the hockey stick of hockey sticks. It was one city. And to me it was really personal involvement. Came to talk to us in 2000 about launching in New York City. 39 And I looked at this thing. And I said this is never going to work in New York. You're not this stupid. And my lesson from that was never again say that something is not going to work. But I think it's 15 years is a really long time to experiment something and to iron out the wrinkles of something. And it's a lot of patience. And I think, honestly, if you ask Craig, he wasn't planning on being in foreign cities. He launched the thing in San Francisco. If you go to the site today, a new user, you still go to San Francisco which is sort of weird. They don't have a list of cities. You land, first of all, in San Francisco. It's a San Francisco site. Second thing, I love to listen more to people here to focus why in 2007 lots of people, organizations, corporations are not doing certain things. It's amazing to me now watching the national campaigns. And there was this incredibly exciting moment in the summer of '03 where the campaign basically let loose and open source his 40 capacity. A few months you had 20 kind of bumper stickers. It was fascinating. And today it's back to wraps again. It kills me. I don't understand it. To watch big corporations today wasting millions of dollars, paying advertising campaigns, one advertising campaign, one advertising agency to design their ad, when they can go to a thousand users and offer a $10,000 award for the best ad. Why are they still talking to advertising agencies six years or 15 years after MoveOn proved that you can use the 'net to have lots of activity contributed. And they still insist on using an old model. So I think one of the questions today is why it's technologies people's mindsets. And why we, all of us sometime in some cases insist on not using what's available to us, right in front of our faces in some cases. MR. WALKER: Or how we work together. Charles, back to your point and Jeff was talking about. Can GE get an 41 engineer for donor contact and donor management. So can we use Charles' model which is a great model saying I can connect with teachers and I can correct directly from the teachers to the donor. And they're getting really a very solid connection feedback to a charity. They're involved in it. Can we develop an engine rather than we're doing it ourselves or the guys in the environment strategy doing theirs. Can we develop one engine that we all can use. And figure out the best, most efficient way to deliver. MR. KEARNS: There's two things to pick up on that. One is from bank lenders. MR. BURNHAM: Explain who that is. MR. KEARNS: He's a genius on network theories with comments at Yale. He wrote a book called The Wealth Of Networks. He wrote a paper called the theory of pure production. 42 But there's one thing that he says that has just been stuck in my head since he said it. And it was that any place where you can look for network production where there's excess capacity built into the basic unit that's produced. So information, you know, there's excess capacity, you can pass it around. That's why there's all this network production around information. But you can also to do a category. You buy a car. And most people want a car to go from point A to point B. But they're sold with three extra seats. So where do you need, see network production. You see them in the slug lines of Washington, D.C. or the carpools that just go and pick up people. So anywhere where there's excess capacity built into the basic unit in the advocacy world. It's the members. They're in and out, just ATM machines. They're also smart and skilled and passionate about things. You know, so all the places are ripe for network production because there's excess 43 capacity built into the basic note. You see it in like CD and the search for extraterrestrial life. People using the excess capacity computers. The other thing is I think around the self-organizing. And we don't need to pioneer that. There's a lot of self-organizing systems that are kind of driven by physics and by chemistry. And there's real rules on what they need in order to self-organize. You can't just throw a bunch of things on the table and let them organize. They have to have a certain amount of energy. They have to have feedback mechanisms which fuel the process. And I think if you're looking for a kind of, you know, that are the structural guidelines on building self-organizing philanthropy efforts, you have to look to the wisdom of those systems and say, you know, how do we make sure that we're placing the infrastructure in place so that there is positive impact. So there is trust. So you can see, in a network view, you can see where 44 the traffic patterns are. When you think about a network leader versus a boss, a boss in charge of a firm understands how to deploy resources. In networks you have to able to see traffic patterns. You have to be able to see trends. And how are we daylighting those like, Donors Choose or these other ones, saying, here's a trend. And giving the group the ability to self-organize. I think the one that we're most familiar with is just traffic patterns. Looking at the traffic maps on the way there's no central traffic authority that don't come in 9:00 to 5:00 today. They just show you a map. Traffic jam, it's red. And everybody optimizes. Go around it. None of that is detailed in change for advocacy groups. And I think that's the real challenge to us, is to think about back to philanthropy. Back to social changes. MR. BURNHAM: One of the things that, Marty, you're saying requires a platform that Jeff Weiner or Jeff Walker are 45 looking for is it's a medidata that will be produced as people interact with that platform. The challenge, I think, in creating that platform. And I'm very naive about the nonprofit side. But if I just imagine what the challenge might be, it's that on the for profit side getting companies to agree to a common platform that reduces the entry barriers to participating in a network or maybe reducing the value of the network effect that they've already created because they have a critical mass in that community, is that they are giving up a competitive advantage. And as much as we like to think, and I'm again, I'm guessing here, you guys live in this world. But my assumption is that the people who run these organizations which today have a traditional structure of aggregating, you know, investors call them donors and then distributing the proceeds of that, are going to be very reluctant to give up the network that they've already created and contribute that network to a common 46 platform. Because they've worked very hard to own that existing franchise. How would we solve that problem. MR. YOUNG: Typically, you don't. Typically, you replace the existing players as opposed to re-educating them. It's the rare existing organization who can adapt to the new model. You typically replace them all. Companies like Hewlett-Packard who remain relevant over decades are the exception. The typical company is Lotus or Ashton Tate. Or, you know, anyone suspect that's going to happen to a lot of the philanthropic organizations that we know and love today. MR. WATSON: The problem is you're not dealing with companies. You're dealing with nonprofits that are providing in a lot of cases social services that aren't provided by anything else in their communities. So it was a common interest in increasing the philanthropic pot rather than just replacing what we already have. 47 Philanthropy is flat in this country. It's been flat for a long time. It's roughly 2 percent of GDP. If this open source movement or scheme could potentially increase that even 2.5 percent would be a real motive. MR. DASH: I think to put it in Marty's term, the excess capacity is emotional. Like we talk about the solution to the problem is technology. It's not an open source AP that is missing for making people more generous. There are open source funds in Craigslist, yet nobody has made another Craigslist. I had a chance to talk with Scott before the meeting started. And Charles epitomizes what DonorsChoose. The emotional component of why the service was built into the business plan. So the reason that we connect with donors and see what impact our money had in the classroom is not to improve our efficiency. Because it makes us feel good. And I think that's the thing that technology doesn't address. Almost none of 48 our tools say we talk about medidata. You call it medidata. That's not medidata. That's how I feel. And there's no way to say that. This is the friction, right. When I replace the old philanthropy that I had, replace that old institution, I'm losing an emotional connection. And that's why we can't just simply say this is going to be more efficient. It's going to kill the old thing because with that kills the desire to contribute. MR. BURNHAM: Let's pick up on your point and Tom's point and say that if something like Kiva or something like Donors Choose reduces the distance between the donor and the recipient makes the donor feel more involved than a recipient, then I think it's very likely to be going to increase the willingness for people to contribute. And so I think it has the opportunity to increase the size of the pie. And, you know, I may have an emotional connection to an institution that I have 49 built up a lot of confidence in over the years. But, frankly, most of the institutions, I think there is a certain amount of sin simply around the amount of time and energy that those institutions must spend gathering assets. And if, again, these new models can reduce the overhead associated with gathering assets and make people feel more immediate emotional connection to the recipients, maybe we will increase the size of the pie. MR. BEST: Two statistics that lend themselves toward where we're going is, number 1, that 70 percent of the donors at DonorsChoose have never before contributed to public schools. It's the first gift that they've ever made to public education. And that's suggestive of how it's increasing the pie rather than cannibalizing off of other education focused charities. The other stick that really interested us is that our donors are not educationcentric people. We figured when we surveyed our donors that they were all going 50 to say I give to DonorsChoose because I care about public schools and teachers and education in this country. They had no particular interest in education. They came to DonorsChoose because it was the one place that they could choose a project that speaks to them personally. See where their money was going. Have an emotional connection for those that they helped. And it was nothing specific about education. And I don't know if that's the same with Kiva. And if the people who make loans at Kiva aren't micro lending policy lumps, but are people who want that correction, I don't know. MR. SHAH: I think 2 percent of that GDP, only 2 percent of that flows internationally. So Americans are pretty philanthropic. But it's going to churches and other organizations. So the way I view Kiva, this is almost like kindergarten for international philanthropy. The 12th grade being a Peace Corps volunteer. How do I put that kid on a Facebook. It's 20, $15. It's 51 a loan, not a donation. You can get your money out of the system. You're connecting with that individual. Matt designed the lowest friction, most sort of an addictive compelling type experience that people are looking for and get them hooked into that system. And then I think you can create that kind of Howard Dean-style broad base community support type effort in something that typically is overlooked by most Americans. So we're seeing that play out. I think what's interesting about your point, the existing organizations. And will they move their model or will it be new organizations like come in and disrupt. One of the problems is cannibalization. So I expect that people really dig loans. There's information there because when you get repaid you know that philanthropy is working when you don't get repaid. Something didn't go right. Then you understand. And that's what people crave, 52 feedback. There's feedback in loans. And for a typical organization financing, raising donations to move to a loan model you're going to cannibalize their donations that are coming to your site. So I think it's a very tricky time to actually give away something like 100 percent margin profit of a donation in order to go to a very low market product like a loan and facilitate that. And I think that's why a lot of folks in the micro finance industry are struggling with this. Do we partner with Kiva on or do we just contend it doesn't exist and just treat, try to keep intensify our fund-raising efforts elsewhere. MR. BURNHAM: What's amazing about that conversation is how familiar it is to me. We like being venture capital investors going up against established enterprises because it's difficult for them to cannibalize their existing revenue streams. And they often can't do it that way until they establish something. I'm not sure that's a bad thing. Capitalization has 53 created a lot of innovation. And I think it will hopefully create philanthropy. Let me get to Victoria. MS. VRANA: You mentioned information. And while I agree in the end emotion is at the core of philanthropy, we're seeing more and more donors who care about data and information and results and performance. And I still see a huge gap even with some of the innovations of the nonprofit and philanthropic sector of where you can get good data. If you're talking about a marketplace, how do you compare to locally. 15 percent overhead. When you look at Charity Navigators, that gets you a good rating. In our perspective that doesn't necessarily make you a good nonprofit. That might be a terrible nonprofit, depending on what you're doing and what kind of services you're providing. So I'm still looking for the place where users, end-users from nonprofits can comment on their services. Where donors, where there's more transparency and openess. 54 And I think back to the question of about mindset, nonprofits and philanthropic organizations traditionally haven't had the need to be transparent and open and publish their results or talking about that. In fact, it's really counterproductive to both sides. So I see a potential for that really changing some of these new models. MR. WILSON: I think, Brad, the Web technology, I think about almost any kind of Web service we interact with. Google is Ad Sense is one of my favorites. Go to Google Ad Sense and I make an ad buy. The thing that's so gratifying to me when I make that ad buy, everday I can log in, gets reports to. How many clicks I have. What keywords are performing for which ones aren't. I think that's a mindset across a lot of services today. Because they're really data-rich. And the people that create these data services understand that. And they understand that data is a big piece of the value component, they gave that data back 55 for free. Google doesn't charge you for analytics to their ad buy. You get that for free. I'm embarrassed to say I haven't used DonorsChoose. But I imagine that's built into the model. That people with can actually get reports and see how their dollars are generating performance. And that's the way to go. MR. BURNHAM: On DonorsChoose, that is, and Charles has already mentioned it, that the overhead of producing the reports that we're envisioning, if you did it the traditional way where you had a hierarchical organization that had to approve the data that's being distributed back to the donors would be completely -- it would kill, no way could you make that cost effective. But if you're willing to, in your original point, Fred let go a little bit. And not completely control the data and allow the actors at the edge of the network to actually contribute the data back, then, you know, you have no incremental costs to 56 provide that. In fact, you have less control. MR. KEARNS: It's got to be data that you can learn from. We can all look at whose success rates, but unless you actually can see which appeal has a higher open and click through rate than another, which story on Kiva really resonates and why, I don't think -- I mean, you know, we can show lots of data/information about AIDS and the impact that AIDS has that doesn't move people off the dime until they connect to it personally. MR. BURNHAM: And I think that's a really important point. MR. GOLDSTEIN: Where is Kiva in the latest generation. There's a difference between trying to support donors as we think they should make decisions and as they actually do. Because there's a whole wave of let's give them metrics and data and support to them, really drive good decision-making. So it's not necessary. A, we think the pie will increase if we just get people better information 57 about nonprofits than the economics will improve. There's great idealized sense of how it works. And I think this new pragmatism that philanthropy is more a consumption experience than an investor experience, using those tools to help change the way people really do make decisions. So when we talk about the data to support that, there's feedback to what really drives responses. Not necessarily we just need better outcomes and impact on things that might be coming. MR. HEIFERMAN: I think having to play a little bit with DonorsChoose and Kiva. It's a game. And it's fun. And fun isn't just in data. I personally, you know, am annoyed by the fact that everything in our society and culture has to be in the form of entertainment. But the idea, but it is very ***gas like. And the reason why people sue Facebook is because of the addictiveness. And you spoke of an addictiveness. There's a lot that goes into that. When you know nerds 58 like Fred who like data. MR. WILSON: Thank you. MR. HEIFERMAN: Or it's getting this package you guys should all try. You get these packages from these kids and write you and send you a picture from their classroom. But I think it's all about human needs for this kind of feedback is one thing. But there's another human need which is very separate which is the need to believe or belong. And, you know, this whole idea of, well, it's all about the donors. And then the donors give money to those who need it. The idea of, I would guess that many of you are involved in something that you want to really create a movement. A true movement. A social movement. Whether that's an anti-poverty movement or a green movement or whatever it might be. And the idea of how a true movement happens isn't just about a bunch of people giving some money. It's about people changing their self identity and saying I am 59 a green advocate or I am this. And part of that is money and part of that is a lot of these kind of systems. But it's also about to self-identify. You have to be involved to some degree. And you talk about that kindergarten to Peace Corp. What's in between the kindergarten and the Peace Corps. And I throw out the challenge of how does the Internet change people's self identity to say I am this. And because social movements happen when people, you know, when the women's sufferage movement was over the course of 70 years, men decided that women weren't, you know, they self-identified as not being as being supportive of the fact that women should vote. And so I think we're at the very baby steps. You know, these guys right here are like true pioneers in this whole what they're doing. But there's so much more to do in saying how do people self-organize, self-identify, and say that and how I'm -- so the last thing is limited resource. Isn't 60 just cash. The limited resource is, and people don't just pay money to have something be done. It's a way they can actually give their time. Not typical volunteering. It's saying when we see at Meet Up we have 2,000 Meetup groups meeting up every single day. 2,000 Meetups a day out of the 30,000 active Meetup groups. It's astonishing. Astonishing where you'll see the number 1 Meetups are mom's Meetups. And they have, you tell them here's a tool to self-organize all the moms in your town. And then they adopt a playground. And they make their town better or they take on some save Darfur action of some sort. We didn't tell them to do it. Didn't tell them to do. No one's asking them to do it. About how these things make that happen is the question. MR. WENGER: One thing I love about this discussion is that sort of everybody cease something slightly different. Somebody likes the data feedback. Somebody likes a game. Somebody likes the emotional aspect. 61 And I think something that we can learn about, learn from a lot of the systems successful on the Internet on scale is they haven't been overdetermined a priori. It haven't been too much of a Yahoo case or too much of a specific way of the seeing the world composed. Delicious list, people came up with 11 Yahoo cases. And I don't Kiva and DonorsChoose systems where there's no political message a priori. Where many different types of people can find their own way of using the system without getting a lot of posts on them. I think that's one of the beauties of the incentive, is this very thin layer, just enough to put many people together without imposing sort of a view so that somebody gets data because of the emotional connection. I think that's a very powerful thing. And I think that's also the flip side, that's what a lot of people are a afraid of. But if you built a system that's not overdetermined, you have a lot of control over what users ultimately wind up doing. 62 And I think it's strategic. That's one of the critical observations. MR. SHAH: One of the earlier decisions that we wrestled with at Kiva, if we looked at our peers online in kind of just raising grants, you would actually see that the website was really well designed, perhaps overproduced. Very kind of, a lot of great emotive photos and stories. And instead, we went in the Delicious route. And I was a little nervous about that. But we went with this content on the website. Looks very messy. It is, you know, I think about ***pen particular, and I think that's what people look for. And, in fact, we're trying to make this even more integrated. So when the loan was embezzled, when that loan was used for a consumption purpose instead of a productive purpose, that information should be on the site. And I think donors or lenders actually want to see greatness, authenticity. They want to see things go wrong as well. Then the information when it does go right, we can construct. That's what a 63 lot of these models need to also deliver as well; the bad news and when it's not working. And not try to overly produce and package. I mean, that's what the Internet is about to me, is just seeing the bad and the good. And then trusting the good when it does come out. And being delighted by that. With Delicious it's just been a great model for us. MR. BROWN: Yes. I just wanted to jump in on a couple of things. MR. VARSAVSKY: One is go back to the idea of the traditional approach where decisions are made by big institutions. The big IBM model, my former employer. One of the largest nonprofits in the world. And they pride themselves on results. But at the same time spend a lot of its time trying to decide what the priorities should be. Where this comes into play for me, about a year ago, I ran into a colleague of mine on a project in Mongolia. And she had the coolest project I had ever heard of. 64 She was basically wanting to put GPS's into the hands of local villagers in Mongolia so they can map the national parklands, sacred sites, and other places of concern. And she couldn't get funding for this project from the nation. How much does it cost? $15,000. I said, $15,000 and you're going to put these units into and basically have these people do the work, get engaged, be part of this process locally on the ground and you can't get funding for this from a service? She said, no, we're not a priority in the organization. I said, well, this is a ridiculous system. If you can't fund a project like this, you know, what good are the 900 other priorities that your organization has. But it's a big challenge. I went back to the organization. Why can't you get funding. $15,000? Take it out of my 401(k) or something. Give it to me. Just make it happen. And I think the resistance in 65 putting -- so one step further on that is to say, okay, what if you had an aggregation of these projects. And rather than the organizations deciding what the priorities are, you put them out there and let the world decide. What should be funded and what should not. This is like if the model is true. And let that happen. Well, no, we can't do that. We're ceding control over our priorities. And what our funding should go to is important. So that's a challenge in the big institutions. I don't know how without dismantling it or deconstructing it you free the world to decide what should get done and what should not. MR. PAEZ: Thanks, Brad. I want to start with something that Scott said about the consumption patterns of philanthropy. And then the questions for dot-org. What we see is and what I was focused on about six months ago when I started the technology at our site is that, and this is affected by technology, is how 66 young people perceive and are interacting with philanthropy as a consumption, as a consumer product. More so than this idea of simply donating. The lifestyle choice. And it's a lifestyle pride applications like causes which has 3-1/2 people on Facebook often worn by people. And no money is given. But it's like they're closing on the proposal. I care. This is what I care about. This is who I am. This is who I like to connect with. And you see that in data coming that came out a year ago from Cohen Research in Boston. The best I've seen. 89 percent of Generation Y would reconsider purchasing where one supports a cause they care about. 80 percent of them feel a personal responsibility to make the world better because they feel they're the only generation that can do it. And so what we see in the way that they interact with information and then you see that ubiquity of information driven 67 by technology, they're engaging what they care about in new and innovative ways and feel emotionally connected, like Kiva or DonorsChoose with recipients that they would never otherwise meet. But they're used to emotionally connecting online through data driven interaction. So my question now to Google.org here is what we see is enormous consumer patterns emerging from Generation Y being also mirrored in the media at celebrity engagement causes, increasingly seen in the one campaign. And other increasing cause marketing trends. And Google.org coming out and says, well, we can make a social impact without being a 501(3)(c) for profit business. We have a lot of for profit businesses here who are social entrepeneurs looking to make money and make a difference. And what I see with my charities, CEOs, Make A Wish Foundation, Americans Charities, they see a lot of traditional philanthropy, traditional 501(3)(c)s being moved into more 68 market-driven, consumer-driven models wherever applicable. Is that something that MoveOn.org feels as well? MR. BURNHAM: Do you have a question? MR. GOLDSTEIN: Yes. I want to separate out some of my comments personally. I personally spent time in the early days of the global giving for consumption of the marketplace perspective. Really gone through some of what I've done. Google.org, its focus, you know, certainly consciously made access to all the keys on the keyboard. Whatever makes the most sense to solve the problems is, we're all for problems that Google.org cares about. It's not saying that afternoon. These are all great, important things. Structural flexibility are not met with. I wouldn't say there is kind of an ideology or philosophy around some of those things you're focusing on. To be honest, folks on the 69 dot-com side spent a lot of time on thinking about these and are infinitely wiser than I am. And Google.org may not necessarily fall in the street business. So if you think about the climate, energy, global development, global health, so it tends to be focused on those sorts of particulars. To be honest, the products and services that Google may or may not actually target and may address the future. So in some ways your question is better for the people on the dot-com side than the on the dot-org side. MR. GODSALL: In the end, Google.org, what you said in the beginning, if there's a problem, list a problem, Solve it. We want to access the whole keyboard. I'd like to come back to Bob over there. Sorry to interrupt you, Bob. But when you said to me when any of these ideas around philanthropy is incentive, you can unleash a great force if you can identify that incentive. And if you could bring us 70 back to the time when you had the idea and you knew you had the incentive, therefore, you knew you were bigger than most, essentially. MR. YOUNG: Yes. MR. GODSALL: I'll just frame it. I'm working with Pathogen. People talk about viral marketing. And that's a very limited way to look at it. Because there are many, many ways to infect people. And you had an infection that obviously spread very rapidly like a big outbreak through the engineering community. So can you come back to incentives? MR. YOUNG: Yes. But this kicks into the fund question or the emotion question. Depends who your audience is and what their primarily looking for. If you're in education it's going to be fun. Who's the Latin scholar here? Apparently there is a word derivative. Entertainment and education comes from the same Greek or Latin root word. So they are technically entwined. We tend to learn the 71 things that we enjoy learning. In technology, in Red Hat's case, the incentive was this barter system. The people who were doing most of the contribution to open source were not enthusiasts. These were not emotional contributors. These were not entertainment contributors. They were people who needed to use this technology themselves. But it was not doing what they needed to do. So they made their contribution in order to make their computers work. They gave away their contribution because they're very conscious of how much technology they were receiving for free. So why not contribute back because it became a self-fulfilling, a barter like model and their incentive. And, in fact, their bosses incentive. The reason I actually got involved in Red Hat, I'll tell you the story, was I was coming out of my previous career that crashed and burned. But that's a long, sad story. And I was looking at this open source thing. And I was working in the City 72 of New York's technology field. And the engineers I was talking about were telling me about this free software. And I'm a good capitalist, you know, at the end of the day. Show me the money. And I couldn't figure out how this thing wasn't anything but sort of an odd idiosyncracy that was only going to survive in a unique period of time between when the Intel processor went from the 386 to the 486. The big difference being a 486 could run a real operating system. It could do multi-tasking. it could do multi-user. The 386 couldn't. It just wasn't powerful enough. So you suddenly had 486 processors everywhere that could run a much more sophisticated operating system than most DOS, for those of you who can think back far enough. And so it looked like this whole Linux thing was just sort of a blip. Until Sun and Novell and Microsoft got their act together and produced a decent operating system for the 486. Because afterall, there 73 was no economic model behind discrete software. You talk to Richard Stahlman and he would explain to you that was all emotion. That this is just the right thing to do. And being a good capitalist, I said, not a chance. It wasn't until I talked to a fellow called Dr. Thomas Sterling who was introduced to by Don Becker who wrote the Ethernet drivers to the earlier versions of Linux. He introduced me to his boss, Thomas Sterling. And I asked Sterling straight out, "Why are you letting Don Becker give away his Ethernet drivers at Red Hat?" We were taking his Ethernet drivers, adding them to our operating system. And we were selling our operating system for 150 bucks in a shrinkwrap package. And I say, "You're not charging us so much as a penny for your Ethernet drivers. Aren't we taking advantage of you?" And Don Becker's boss, the guy who was funding Don Becker's work on this because Don 74 thought he was doing this out of emotion is it's the right thing to do. It was Becker who explained it. He said, "But let me get this right. Don admittedly writes some very sophisticated Ethernet driver tooling. He gives it away for free. And we might sell it for $25,000. But in return for giving it away I get back a multi-user, a gigabyte worth, a multi-user, multi-tasking operating system that I can run on as many machines as I put my hands on and you're taking advantage of me?" was his response. So it was a barter. So the point in an MLS world is who's the beneficiary and what's their incentive? MR. GODSALL: Work for any idea. If you can bore down to one problem and you can identify the incentive there's an "ah-hah" moment. Because you have the incentive. I think if you don't have the incentive the problem is philanthropy stays flat. I forgot who mentioned it. But it's 2 percent, right? So a shift in mindset, as you said, Fred. But when you let go, you 75 have to have this great force out there, has to have some incentive to give back to you. MS. GHOSH: Except if, maybe, I'm sorry, if you're a social entrepeneur, your incentive is to change the world. So this makes it actually quite interesting that if your Ethernet driver, the next Ethernet driver that you're talking about as a social entrepeneur. And the real incentive is really to have impact in your particular field or the area that you've chosen. Then you actually have built-in incentive to share your idea. Not always. Because you have other people competing and all of that. And now the same competition thing does exist in the social sector, as much as we think it sort of shouldn't. Just speaking from the Ashoka experience. At Ashoka we've seen the identity creation that Scott was talking about of the social entrepeneur that was there. But then where we are right now is we figure that all the knowledge that's come from this network and community of social entrepeneurs worldwide is 76 really a magnet, individual magnet, collectively, a magnet. When you begin to start thinking through, well, how are all of these pieces, how do these pieces act together, add up for each after each one of the fields that we're looking at. And once you set up that magnet, then you say this isn't the ultimate wisdom. Basically anyone around the world can who wishes to self-identify as Changemakers, come here and prove this. And, in fact, this is the line thing. Crash and burn this and improve it. So this is the approach that we're now trying to, trying out with Changemakers.net where we're actually organizing online collaborative competitions every three months. And it's the only place that you'll find on the Web where all the entrants go off into some black hole after which some judgment is made. But it's all open. People compete. Everyone else can see or the competitors can see. The world can see. Everyone can improve and review. And 77 the consent of what comes in. And the whole point is participation is key. Not because of only the money, because the awards are just $5,000, which isn't really as much. The judges are investors. So that helps. That's sort of a practical reason for field building investors. So there's a reason for that. But really participation helps you improve the idea. And puts it out there for everyone else to come and improve your individual and collective ideas. MR. WILSON: John wanted to get a thought in. MR. JOHNSON: Just really quickly. I think what's underlying that and what's underlying this incentive question that hasn't been brought up yet is this idea of social capital. And that's really, you know, I think we're talking about leverage points in the Internet. That's right up in the top 5. But, you know, I think there's a problem in that we're bringing this kind of binary Adam Smith perspective. You know, 78 either selfish or selfless. Selfish being a kind of fiscal selfishness, or selfless being absence of fiscal intent to this perspective. And now I think we've got to chuck that. And, you know, just understand that there's this new spectrum. We see, I think from all the people that are going through the website that's offering certain messier information, I think that those are social capitalists in a lot of these in Facebook. Social capitalists looking for inefficiencies. That's where Alpha is from social capital perspective. MR. BURNHAM: Right. I think that, you know, I agree with you. And I like debating Bob because I think, you know, I think we're actually talking about the same thing. But I believe that social capitalists, as you say, or reputation is becoming a currency that people care more about. More liquid information is, the more global information is, the more they care about that currency. 79 And I think Becker cared a lot about the reputation that he was creating, about the quality of the code that he was contributing. And within the community of peers that he cared about, they respected and understood that that was his contribution. And one of the keys to Linux's success was that it was apparent where that good code came from. And I think that we're going to see that is played up. MR. YOUNG: But that still doesn't excuse you from prioritizing those. So you're right. In Becker's case it was very emotional, his contribution to it. And it was reputation based. In his boss' case it was very financially based. It was a barter system. Having said that, if you just asked around the Linux world, they would have all told you it was emotionally based. This is the right thing to do. When the reality was it was actually primarily financially based. And this is what we have to do as executives in our teams is if we get these 80 wrong, if your customers say it's A -- you know, what's the expression? The old expression is the customer's always right. The truth is the customer is not always right. But he is always the customer. And it's needs versus wants. The customer will tell you what he wants. It may not be what he needs. And it's your job to figure out what your donors or your recipients or whoever your audience is, what they actually need. Not what we're telling you they need. Because if you're doing your job properly you know what they need better than they do. MR. WILSON: Brad, I just wanted to tell a story because I think it's related to this. Back about three years ago I decided to put Google's assets on my Web log. And I didn't do it because I wanted to make the money from Google. I did it because I wanted to understand how Google Ad Sense worked as a publisher using it. So I made the decision the day I put on there that I was going to give all the money I got from 81 advertising to charity. And the minute I did that, it just changed people's perspective about the blog. Who I was and the ads on the blog. Because all of a sudden they said, gee, that's actually a good idea. He's giving his money to charity. And I've given probably $100,000 over the past three years to charity as a result. Not all from Google. But there are a various number of things. Given to the Gramene Foundation. That's where I started. And then I've moved over time. And the interesting thing is that advertisers now come and bid against each other to get display on my blog. But charities cannot come and bid for those dollars. And I'd love for that to happen. And what's a tragedy is that I actually have to pay taxes on that income and then give it away. Because the systems that exist on the Web today can't just flow those dollars from advertiser to charity. And so I have to sit in the middle and pay taxes on it. 82 It's not that big of a deal. I don't mind it. But this is where technology can solve a lot of problems. And, you know, we're already getting, we got marketplace economies now for advertising. We don't yet have marketplace economies for the philanthropy world. And that I think part of what we're thinking about here is how to make that happen. MR. WEINER: Just to pick up on that. As important as we all understand incentives to be, whether they be social or economic, particularly in community environments, I always go back within this world for providing people with a way, I think there's a lot of people who want to make a difference in the world and they just don't know how. And I think one of the fundamental things that's changing, that's going to continue to change the ease with which people can now help and get involved. And that's why I go back to this notion, as Jeff mentioned earlier, a commonly shared 83 engine or a commonly shared platform. Because we can do that. We can start to take even more friction out of the system. And keep in mind, you know, I think we're asking a lot of great questions here. There's a lot of different constituencies. Bob referred to it as different customers. We've got developers and engineers. We have the social entrepeneur. We have the people who want to donate their money or their time. And each one of them brings something different. Each one of them will be missed differently. Each one of them finds certain objections that prevents them from doing the things they want to do. And I think we do have the wherewithal now to try to address and solve each of those challenges. But I can't forget or I always keep coming back to this notion of is there a mechanism to scale the efforts in some of the people in their companies around this table and become what you mentioned earlier. I think Albert suggested 84 Delicious introduced this somewhat unique notion pertaining to social bookmarking of a very simple lightweight app. A lot of people come and customize their own apps. A social bookmarking. You start to unstructure the front end versus the back end. The front end sounds like it's a lot more like Craigslist which is, in your parlance, I guess, highly authentic and gritty. That's part of, one of the reasons for its success. But it's the back end where I feel like some of the effort between you and Charles and some of the other folks around the table. If we can facilitate the means with which engineers and developers can start to build apps for your site and build apps for Charles' site. And build apps for Charles site is similar to the people who took the Delicious code coming up with things, as brilliant as you guys are, you couldn't conceive of. And you just start, offer massive scale, the rate of development. MR. WALKER: Just a bundle. We've done it in Empower, Microsoft, Accenture, Dell. Because you're not putting 85 in a leverage tool, all of a sudden they see it. We got it. I think if we set up these engines we can go get it and everybody can use it. MR. BURNHAM: Folks, it is now a quarter of 1:00. We're sort of 15 minutes behind. And I don't know what's for lunch. But it's hot or it was hot at 12:30. We should probably get up there and grab lunch. We have a lot of time this afternoon to pick up on this question of could we envision a way to create a platform. and I think when we come back down let's certainly make a point of wrapping up the discussion on what the key drivers are, what the emotional component is, what the incentives are. And then launch into a further discussion of what do we do now. Thank you again for coming. And let's all move upstairs. (Whereupon, at 12:45 p.m., a luncheon recess commenced.) o0o 86 2 AFTERNOON SESS 3 2:15 p.m. 4 MR. BURNHAM: So let's go ahead and get started. I think we'll have people sit down as they grab their coffee or get back to the room. Just trying to think about the summary of the conversation this morning. That what we wanted to accomplish in the conversation this morning we accomplished it through agreeing. We also introduced a bunch of other ideas to think about what the implications of what light Web services were. What the characteristics of those services were. We used Craigslist of an example of a hyperefficient lightweight Web service. Scott introduced the notion that it was a self-organizing principle. We spent a lot of time talking about incentives and new kind of incentive that may not be directly monetary that maybe drive some of these social incentives. And I think we all have a sense of what this phenomenon is about. 87 People are willing to, number 1, ontribute some sense of their Web presence. 4 You know, some efforts on their part. Some 5 discussion about the ess economic value 6 that could be mined by others. People are 7 willing to contribute that. The Web seems to provide a platform for that, accelerates the degree to which people can interact in that environment. And, you know, there's this emerging phenomenon that we're all trying to figure out. Okay, now we see this behavior happening. How do we make or create an environment in which positive social change is linked to that commitment that's made by individual users acting in a network. So, this afternoon what we wanted to dive into is the application of those principles in philanthropy and in social action. And there's two obvious ways to think about it. One is that there's if the established infrastructure of philanthropy and one could think about it, in my world the model would be in the enterprise software 88 world where business has deployed software hat improve the efficiency of those usinesses, sometimes fundamentally changing he way the organization worked together, but ll within the boundaries of the 7 organization. That was the enterprise 8 software wor 9 And then we began to see models 10 emerge that were fundamentally disruptive to the existing structure of markets. So Google, as an example, clearly fundamentally disrupted the advertising market. CBS in their best year had 350 advertisers. And Google, my guess, I don't think they published it, has something like 850,000 advertisers. And it was they created a fundamentally different business that has changed the structure of that market. So there's two things that we can think of technology doing in the philanthropy and social action space. One is improving the efficiency of the existing businesses and the other is creating brand-new businesses or fundamentally disrupting the structure of the 89 markets. I don't think they're mutually xclusive. I don't want to set up a binary pposition. But I think we need to talk bout both of those. And I'd love to have nybody jump in and help me out here with ome thoughts on which of those is more mportant, which of those is likely to have 10 happen. How they're going to happen. 11 MR. COSTOLO: I think that one of 12 the interesting things about lightweight Web 13 services and peer reviewed Web service is people will start to end up using them for things that you didn't anticipate. And of course lots of times they might end up using them for things you may not like. So that's not particularly of a concern in a commercial/social media company. For example, where you might say if it's MySpace founders, thank god they're using it as much as they are. We only care that they're using it for X. But in the philanthropic world, right, where you may have founders or people 90 invested in the development of the platform ho are a lot or interested in, well, I want t to be used for this, right. But people re using it, set up al Qaeda relief funds, ight. Much more interesting tension there. MR. BURNHAM: Absolutely. And so n the case of MySpace or Facebook or Craig's ist -- hello Craig -- well, you know he's going to get hit now. But, you know, there's a lot of activity on that site that is, well, consciously uncontrolled. 13 And the point, I think, Dick is 14 makins that Craigslist I think has a 15 social mission of making it possible for 16 people to collaborate, work together, and solve problems together. But it doesn't try and decide what problems are being solved. And when you have a nonprofit with a social mission, maybe they're going to be less comfortable putting a platform up that they can't direct. MR. COSTOLO: It certainly goes into the statement earlier in the day that will probably be a new organization that 91 comes along that enables that to happen. ook, I'm going to do this knowing that there re going to be things that have gone on here hat I don't like. MS. CRUTCHFIELD: Well, as elating the foundation for the next phase of his discussion, I just want to share a ittle bit from the perspective of lists for 15 years that the nonprofit and social sector space. There's a misconception floating around that I think we should sort of bring all the dollars onto the table. First of all, assumptions are being made about how nonprofits operate what 16 they may or may not be comfortable with. 17 Lobefore the open source was highlighted 18 on the Internet, nonprofits have been 19 successfully using open source strategies from the beginning. In fact, in the book that I've written, one of the key success factors of the highest performing nonprofits is precisely this notion of creating an open source way to tackle the problems that they're trying to solve. 92 So I'll give you one example. An xample of the groups in our book range from abitats For Humanity to Teachers of America o Self-Help. The Heritage Foundation's in ur book. The Heritage Foundation is ctually a great, powerful think tank and dvocacy institution. They are precisely uccessful. That while they have one site in Washington, D.C., from the very beginning they said we want to win the war of ideas. And whether you believe on the right or the left of the political spectrum, they've helped win that battle. Anytime a policy thinking said we'll train you, give you our donor list, help you set up. Because they drew the circle so big that they wanted to further the 19 movement. They thought everybody who had a 20 ece of that vision, they wanted to enable 21 success. They set up a state of the art 22 recording studio in their offices. Any shock jock, any pundit that could come in with a message can. And they have a quarter of a million dollar budget for training them to do 93 so. They gave in a way and they enable everybody in the movement to succeed. What's interesting, you don't live in D.C.. I don't even know if anybody n this room can name the CEO of the Heritage oundation. We know Ralph Reed. You know he Christian Coalition. Still, the Heritage oundation's been there for 30 years. You don't know his name. Incredibly powerful. He leads from behind. It's all about enabling others. So I just use that as examples. Every nonprofit that's been highly successful has used this sort of approach; they give it away. Exploratorium is another great example. The first hands-on science and technology movement center. They revolutionize what we were talking about, museums today, over lunch. Said a museum shouldn't be just a dusty place with rare 22 facts, artifacts you can look at, never 23 touch. You need to experience it based on 24 the worldwide hands-on science museum. 25 Nobody has ever heard of Exploratory if you 94 haven't been to northern California. Probably everybody in this room has at least been in touch there. They expect, 10 percent of their budget helping every other science museum copy their model and spread it. Never asking for branding affiliation and never asking for any kind of quid pro quo. So they ede it. But it's not visible on the balance sheet. It's not visible in other ways. So is this is how. And I'm not saying every nonprofit, by the way, does it this way. But the best, according to our research in our book, do it. So business world is in the nonprofit world. I think where the challenge lies for us, now we're talking about the Internet, the difference that makes in terms of being able to scale solutions. Not every social problem has an Internet application. But I think that a big challenge that we as a social sector face is how do we spread these ideas, these solutions. And part of it is scaling up our organization. And this is 25 where we get into the challenge of the la 95 of accessing capital or efficient capital markets. If you're a for profit company you can go to venture capital. You can go to the public markets. You get big money quick. Kiva is a good example. Meeting with him before this, he needs several million dollars do scale up to meet some of his challenges. He's going hand to hand grant to grant. The foundation that I represent can do some. But there's not a place where entrepeneurs can go with a great idea for the social sector and get relatively big money quickly for that investment. So one of the challenges for this group is how to do we market like that. Not just by issues. DonorsChoose have an education space at a specific project, but at a larger level. We need to try to solve this type of capital market challenge for the social sector so that really great ideas can get to scale. And right now we don't have that. MR. DAR: We're in the same sector. Idealist is, we're not profit. So we 96 see nonprofits all over the world, thousands of them. I think, honestly, from my perspective, the groups that you pointed to are exceptions that make the rule. Which is that most nonprofits are, in fact, viciously and highly competitive. And when I say "viciously," I choose the word carefully because they're competitive in a sort of passive-aggressive way that can drive you crazy. And the for profit sector, the rhetoric is extremely clear. We know Google. We know Yahoo. We know exactly what they have in common. We know where they compete. They know where they compete. And the fact that they're competitors and acknowledge that. In fact, collaborate on certain things. The government quickly collaborates on that. Whereas, most nonprofits don't even acknowledge that they compete. And therefore, in fact, they find it hard to collaborate. This weird paradox. By not acknowledging we're competitors, we, in fact, 97 can't collaborate. Where sometimes acknowledging, in fact, you compete, you can, in fact, collaborate in many cases. These are honestly, sort of exceptions, I think are great. But most nonprofits aren't that way. MS. CRUTCHFIELD: They are exceptional because of their performance based upon our studies. And not every nonprofit has adopted that, those strategies. And it is very difficult. And it's the ones that are able to draw the circle big enough where they don't seem like competitors, but as conduits to the larger cause. Jim Collins writes about the level 5 leader. But the company's mission is above ego. Great nonprofits put the cause ahead of even their organization. So if it's about climate change and changing the directory, then you'll do anything to effect that change with the level where the right, RDC, you'll work with Green Peace, as long as you're trying to get to that end. It's sort of a mindset. And I think it's probably true. 98 I don't know that much about the founder of Linux or Wikipedia. But I think what they care about most, like any entrepeneur, is the idea and the innovation, and changing the world. And it's not about the money. And you see those people on the for profit and the nonprofit side. It's just legal status. I think that's what we're trying to get at. MR. BURNHAM: There's a direct trough between leverage and control, really. And if you need to control you're not going to have the same effect. And we see it in politics. I'm not a historian. But I understand that one of the things that left us with the legacy that we now live with in the political structure that we have is that George Washington was willing to say, no, I won't run for another term because it's the institution that counts. And that's what's going to create the legacy. Not me running for another term. Contrast that with Putin or with other folks. I think Nelson Mandela did the 99 same thing. No, I need to step away because otherwise the institution will become me. And I can't be the institution. And I think the same is true of some organizations. But I don't know if we can come up with a definition of what we mean or a simpler, more precise definition of what we mean by open source institution. Has something to do with that. But it certainly isn't the software definition. That doesn't make any sense in this context. You're not now. But it is related to openess. And it's related to the mission as being, you know, to contribute a whole that's larger than the institution. But one of the areas that this is going to show up is in data. And Jeff was going to talk a little bit about this at some point today. But if there were a platform through which people could collaborate just to think about what an open market would look like for open source institutions to, you know, to increase the liquidity of capital to those institutions, increase the leverage of the ideas coming out of those institutions. 100 The currency would be data. And it would be us, you know, the idea of somehow thinking about what open data is. MR. WEINER: What kind of data? I'll give you an example. Charles can speak to it much better than I. But he has access to Comstat so one of the things that he really got me excited about when I was first learning about DonorsChoose is by virtue of the system. He can track, for example, in New York City where there are certain demands for certain kind of textbooks. And all of a sudden you see in the Bronx there's a demand for history books. And teachers keep uploading these projects; we need history books. Well, guess what, there's probably an issue with history book distribution in the Bronx. And you start to apply the same level of insider structure from Premal's platform. And then you start to enable economists to plug into this in a sense, make sense of it. You start to distribute white papers. You can only kind of imagine the kind of value added. 101 You mention data that as part of the mechanism, as part of this open source of correspondence. We have not touched on business models today, explicitly. We spent a lot of time talking about technology. And one of the things that Charles and I talked quite a bit, a lot is sustainability. How do we make sure you're not constantly on the road having to raise money. And I understand that one of the things you started to consider is interest. I don't know if that's going to happen in your models. That's really interesting. No pun intended, by the way. That's really interesting because it creates a certain kind of sustainability. And Charles, you should maybe tell the story, the anecdote about Crate and Barrel. And after Charles tells you the story, imagine there are ways to start to focus on the nexus between the ROI and RROI where for-profit companies leveraging kinds of engines that Charles and Premal were operating would potentially share the 102 economic returns to some extent; not all of them. But beginning to give back some of those economic returns to make these business models more -- Charles, you want to talk about Crate and Barrel? MR. BEST: A couple of companies. Crate and Barrel has given donor gifts to their customers so that their customers can become philanthropists. So they track and they use an outside research firm to isolate the impact on purchase intent and customer loyalty towards Crate and Barrel generated by/directly attributable to the distribution of this gift of giving. The giving out of these DonorsChoose gifts. When Crate and Barrel saw the increase in purchase intent that they had created for Crate and Barrel by giving out DonorsChoose gift certificates they dedicated 3-1/2 percent of their advertising budget, pulled it out of their foundation, put it within their advertising budget and giving 100,000 gift certificates. Because they actually see it's not about helping 103 kids, it's about increasing customer loyalty more effectively than through other more traditional advertising is mechanisms. MR. YOUNG: Charles, can you give us 30 seconds as to how DonorsChoose is doing? MR. BEST: Maybe people in Donors Choose should do that. MR. YOUNG: Three and a half of Crate and Barrel's number is a big number. That's not your only donor. How big is DonorsChoose at this point? MR. BEST: We're growing exponentially. I think Kiva's growth curve is even steeper. 127,000 public school teachers have posted projects. We just opened our sites to all the schools in the country just a couple of weeks ago. So we'll see that grow more rapidly. MR. WENGER: I'd love to know, as part of that, are you constrained as to how fast you can grow the DonorsChoose by lack of function for the operation itself? Or I 104 think that was Leslie's point. MR. BEST: It's really interesting. Because I think that Donors Choose and Kiva have different constraints. We're both attempting to achieve relative sort of more equilibrium between supply and demand. Which for DonorsChoose is a classroom demand and donor supply. Our constraint is a little bit more donor supply than teacher demand. Donations and donors have been doubling year over year. Teachers' participation is on a an even steeper curve. I think that that's the inverse of what's happening at Kiva. MR. SHAH: Yes. So we have, it's a nascent marketplace where actually some of it is due to media buys. So we're actually today capping the amount people can earn at $25. It's surprising, the capital on the site because of the absorption capacity. Every day 60, $70,000 of business is in foreign countries. But we're only 20 months old. We can only scale in limited means 105 right now with the NGO community. Just not keeping up with the Internet community's demand to actually fund small businesses in the developing world. So right now we have a broken marketplace where content isn't expiring. Which then doesn't allow NGOs to really compete, to post up great content or compete on social return. And so we need to clear the woods right now and get that, hit that equilibrium point. We're still a couple of years off, depending on the rate of scale. MR. WEINER: Of your model, both of your models reach a point of sustainability. You can project out once you raise that upfront money. That's what's unusual about your model, is that they become self-sustaining. MR. SHAH: What's become really interesting, and I think we learned this from the DonorsChoose, when you check out there's an optional 15 percent donation you make to DonorsChoose. And we follow that. And what 106 was really interesting is roughly 70, 80 percent of our lenders are contributing 10 percent onto the loan. I used to work at PayPal, eBay. Our take's actually greater than eBay's or PayPal's. Which is really interesting. Because I think it's because by being a nonprofit we're fundamentally more profitable in some ways. If we were Ticket Master in an acquired field, people would actually know. There's about a 3 percent fee. Again, it's really interesting. Something else that's nonprofit based. Crate and Barrel realized that it moves the needle in terms of royalty acquisition. There's people want to fund these things. So it can be quite profitable and self-sufficient in a short amount of time if you ask the right way. MR. WEINER: It goes back to the point Anil mentioned earlier. We were talking quite a bit about technology. And you reminded everyone that, yes, the technology is important. But it's the 107 emotional connection that fuels both of these models and why you get people raving about them and every for profit. As your customer base starts becoming your market base and sharing it through word of mouth. And the connection through the fulfillment, once you get connected, and Scott mentioned the package he received after he did the Donors Choose donation. You people were recently featured on Oprah. And I think the profile opened up. It was a woman on tape. She experienced, Kiva. She described being addicted. And it's that emotional resonance you get when you connect. For all the time of technology, no, all the time of the self-sustaining business models, at the end of the day the secret is in North America genetic it needs models. And the need for that and the resonance because of the way the model works. MS. CRUTCHFIELD: You have to create the experience. That's what all nonprofits struggle to do, which is, let's 108 say you're serving battered women or you're trying to help youth. How do you create an experience around that. And some of the more successful nonprofits find ways to make it real. This is kind of the taking it offline for a second. It's not necessarily Internet based. A great example, the New York founder is here. So City has a youth corps that pays young people. Like a domestic Peace Corps. Normally, like maybe a 600, 500 corps members per site. City makes the experience much broader by hosting service on. So that tens of thousands of people around the country can do a service project for one day. And it's a sticky relationship building this experience where they have more donors, more volunteers, more awareness. And I think the challenge for nonprofits is, okay, how do you take that one step further. Not everything is going to be an Internet transactional exchange the way DonorsChoose or Kiva is. It's about money in the end. Lending or giving money. It 109 doesn't solve every nonprofit's problem, basically. But it happens in the Internet. And that scaling, I keep coming back to this question. Whether challenge of, you know, you mentioned the core profit sector, the cycle. You have destructive innovators come in and they displace a giant, right. So if you look at the top 25 of the Fortune 500 today, probably about a third of those companies are relatively new. They've probably been founded since 1965. You have your Googles and your nonprofits up there with your IBMs and your GEs. If you look at the top 25 of the nonprofit sector, there'll be 400 lists. What percentage of those nonprofits do you think in this room were founded in the last 20 years, any guesses? A VOICE: Two. MS. CRUTCHFIELD: Ten. Any other guesses? Less than 1 percent. Habitat For Humanity is the only one founded since the civil rights movement to get to the top of our list of Fortune 500. 110 That's not necessarily the measure of success for the nonprofit center. But there's this barrier to growth on that level. We don't have creative construction. We have a hundred years of it. Salvation Army, Goodwill, American Red Cross at the top of our list. Because they stay there with billion dollar budgets. And we have Kiva. MR. WATSON: That's because of a little thing called the tax code. There is no business building for nonprofits. There's no exit strategies taken of these places in the for-profit world DonorsChoose, Kiva may use in talking about putting themselves together. Or Google might be talking about buying them. That doesn't happen except in very, very, very rare instances not for profit. MS. CRUTCHFIELD: You don't have the mergers and acquisitions. MR. BURNHAM: I think that misses the point. Google, yes, there was an exit strategy for the original investors very well. But Google came. And Leslie's core 111 point is that Google is a very large and powerful institution in this country. Didn't exist in 1996 I think. I think they were formed in '97. So the point is that even though the emergence of that won't happen in this world unless -- I actually think that part of what we're talking about here is the opportunity for the Web to change that. And to disintermediate the current infrastructure there and enable these start-ups to thrive. And I think that it is important to be thinking about business models for these nonprofits. And I'd love to sort of come back to Craigslist for a second because we were talking about the disruption. Craig doesn't like to talk about the amount of media that has shifted from a traditional classified industry to Craig's List. But it's a very large number. And the reason that media has shifted is that there was an inherent inefficiency in the way newspapers collected ads on the phone, keyboarded them in, printed them, distributed them. Killed a lot of trees. 112 All we were really doing was putting a buyer and seller together. And Craig figured out that he could do that much more efficiently. However, the radical efficiency of Craigslist depends on the contributions of users. And the users are not going to contribute to something that is rapacious, morally repugnant, or uninvolved in, involved in things that they don't want their brand, their own individual personal brand to be associated with. So there's a kind of convergence happening. Because you can't keep up with the efficiency of something like Craigslist with a traditional model. So if you depend on user-generated contributions, you have to have a brand that involves those users and envelopes them to brand themselves. And if do you that you're going to have to go from a for profit or not for profit. Give them something to believe and something to hang on to. And I think with Wikipedia, organizing the world's information, making it 113 accessible. I think Craigslist's building community. There are things that these brands stand for that people are willing to do. And I think the for-profit organizations are going to have to incorporate that and the not-for-profit organizations are going to have to incorporate that. Sebastian is doing something, working on the project directly. MR. TRAEGER: I guess I'll just give our perspective on kind of the space and what we're trying to do to solve it. In terms of talking about what are the fundamental drivers of kind of the philanthropic space and how do you kind of think through how to bring about, basically to get that 2 percent number and try to increase it in terms of giving. We always just come back to the best driver, without a doubt, is the users. The fact that people don't really care that much. And don't see giving and serving as part of their everyday lives. So, for us, I think the technology is really important. 114 And of course you can create technology that does amazing things. And we're trying to do that. But that's just a small piece of it. So, for us, we try to think all the time about what can we do to change people's world view. Change the way they think about what's in it for them. And that's probably the biggest thing we spend our time thinking about. What is it that's going to give that, see, the more they're invested in giving and serving, the more their lives change. I think pressures of life are relieved. The more satisfaction, the more meaning they get. We spend time, a lot of time thinking about that. From a practical level of how we do that, I mean, I love what Kiva and Donors Choose are doing. I think one challenge with those models, there's two challenges that I see that we're trying to address. The first, of course, is that it's still kind of a Web 1.0 approach to marketing, in a sense that they're specifically, very specifically saying we 115 care about schools or we care about the developing world. They're not saying, you, as a user, tell us your passion and we're going to do everything we can to link you with something that's meaningful for you. So that's one thing we're trying to do. Whatever your passion is we're going to find something for you because we'd much rather have you be passionate about something than just sort of sitting on the sidelines. I think the second thing we try to do is think of on the data side. So for focus, we really approach the data side and the transaction side. And realize that if we build a site that was only fundamentally about giving, the challenge in the philanthropic and I think the challenge around sharing data is there's not much of it. There's not that much giving going on in terms of, I mean, how often do people give. Once a month. It's not that high transaction volume. So we're trying to increase the transaction level so that we can try to start 116 to get intelligence on people. To build algorithms so we can build how meaningful is what you're doing. How much you perceive is making a difference. And what are the things you're doing. So you're trying to define what it means to be involved in the sector. MR. BURNHAM: These are transactions factors. And you're an information market. MR. TRAEGER: We want to be a factor. It's giving. Serving is attending. It's just serving that's encapsulated in that idea. We want to trap, quantify, equalify. We want to extract useful information from it and roll it up. And I think a third thing we're trying to do, and this is partially the benefit of the position I'm in. Very significant financial backing. So I have a little more freedom than others. We're trying to model what it means to just give stuff away in the sense of we're very happy to promote any and all comers to us and champion the causes of other people. 117 So we're not trying to ourselves own an idea and promote an agenda. We're trying to be, in essence, kind of a superstore of all these great ideas and again just create that marketplace for any ideas. And really spotting the people who are doing a great job, rather than ourselves owning things. And really just live at the very, very top of the funnel. So we just want to be a giant marketing organization of getting a world view and ideas and people motivated in action. And then plugging them into all the great things that are happening. Whether that be directly with a beneficiary or an organization or anything else. So it's kind of our perspective on a lot of this. MR. HILL: Editorial, et al. If it's from al Qaeda, a group they come through or are you sort of setting parameters? MR. TRAEGER: We do have a community manager that's kind of an assignment. All the sort of dirtiness of message boards and communities. And he's got 118 some parameters. Fortunately, we're not popular enough that we've had the big issues we've had to deal with yet. But we are trying to think through what that looks likes and how that would work. So we hope to definitely create some parameters. And we have them. They're all in user guidelines. MR. GODSALL: I'm trying to see a split in one way as opposed to financial markets and information architects, are we trying to increase the charity, the fact we're giving something away, or are we trying to in my mind it would be keeping pace of the problems with the world we're trying to create. We use the Web to create something disruptive and new that can increase our ability to solve problems. Because in a community, if you have one problem, you can get a multiple bunch of things. I think I've forgotten your name. Is it John? At Google, you're saying you want to access all on the keyboard, right? 119 So, in my mind, if we increase, let's say we increase giving in America to 4 percent. But we don't actually solve the problem in America or around the world. Personally, that would be a waste of my time. I mean, I came from Canada. I'd like to talk about disruption actually. I've come a long way to talk about efficiency in my mind. But the problems of the world are changing and becoming more complex. And what the Web's done is enabled a bunch of individuals to organize themselves for their own interests. I think in the philanthropic phase, probably I'm starting to think now it's more around solving a problem that for profit may involve or may not involve. How quick can profit, nonprofit start to collaborate. MR. BURNHAM: Let's talk about structure. I think that we should do that. I think that DonorsChoose and Kiva are examples that are fundamentally disruptive and not improving efficiency. They are potentially creating disruption that will 120 change the list of the top philanthropies over time. But Kiva, as an example, has, I think, a very difficult problem. We might be able to think through with them. Their constraint is the distribution, not the collection. They opened up. And they've realized that we can increase from 4 percent to something more. Because if you make it more immediate, then you can draw people in. But how do you distribute that money? So they can't quite completely get away from the efficiency problem, of the distribution of that money unless we can come up with the way to peer produce rankings or bettings or finding a way to distribute the money. MR. GODSALL: We know it's not because there aren't problems out there. It's not because you don't have entrepeneurs, you have ideas. You go to the Kiva site and I'm actually pissed off that you've lowered me down 25 bucks. I'm competitive with people. It's a bit of a game for me. But, you know, the problems are there. You know 121 there are people there who want to solve those problems. And you know the flows, money's flowing in. There's a clog in the middle. And to me there's where you start to play with the disruption. MR. SHAH: We have a growth risk. so we could let our NGOs, the existing 70 NGOs. We haven't vetted all of them fully. We haven't randomly sampled, audited. That takes time and money. And from where we started from, to actually get that done. So we've actually limited them to how much they can post each month. But we can raise those limits to say buyer beware. Craigslist, Internet community. The problem is that there's an information problem right now. So, I mean, I'd love to hear either privately or in this forum ways that we can break that constraint of letting our lenders make more informed choices. So this NGO is less vetted. This entrepeneur might not repay us. And how we get that information flow from the developing world. We've been racking our brains. And it's 122 difficult. MR. COSTOLO: You have, on eBay though, you have lenders who have no rating, right. And there are people that say no one ever buys. Trying to buy this laptop and this guy has a bad rating. And you can buy from somebody who has 100 A-plus rating. I don't know. My sense, you be fair and trade about that. We don't know anything about this person. Even if it's my family in India. They're going to feel some connection. MR. KEARNS: Have you looked at distributing the vetting process though. We do media purchases. You call a reporter. Every group needs a reporter press list. You're doing a press release around you're giving or education. Education reporters in the State of New York. Those lists are expensive. We pay big money for them. But it's a fact. And you can have multiple volunteers and call and confirm a fact. You can't throw it up like Wikipedia because then it's only the rich 123 getting richer style. New York would have 5,000 checks. Some place in Arkansas wouldn't have anything. So you need a system that actually says this is the highest priority thing that a volunteer can do in the next 10 minutes. And then someone calls. And it has to be information, you know, like the wisdom of crowds or the whole idea of the jelly bean in the jar. What kind of questions you ask. It can't be subjective. But your analysis, if you have all this interest in people who want to invest and get capped at the 5 bucks, maybe you can say we'll let you invest up to 35 bucks and make two investments to others. And you give them this data. So the problem is we're not turning in measuring this social capital that the movements have into things other than money. You know. We're still aggregating money to solve what are less problems created by multinational money corporations. In the exploitation of this whole system, kind of insufficiently disruptive. What if there are 124 organizations where you don't want my money? You want me to change my behavior, right? You haven't thought about that kind of description. MR. GALIEL: Can I make a interruptive statement? All morning the discussion has been conducted within the frame of a market discussion. And markets exist in a condition of scarcity. One of the things that I think are being missed is the real revolution of the Craigslist and the Meetups. And at Wusabes and the Bug Labs, I'm going to connect those in a moment, is the elimination of a condition of scarcity. So maybe, and I'll explain what I mean in a moment, but maybe the fundamental shift we need to make in philanthropy is to stop worrying about how to make the small donors' dollars more efficient, but to eliminate the scarcity in donations. So, for me, the elimination of inefficiencies in classified ads that Craig's List accomplished is only part of the story. 125 The other part of the story is that there's no scarcity. There's no limit to the number of ads that you can't put on. There's no necessity for Craig to worry about how efficient my ad for my model train is on Meet Ups.com. There's no scarcity of Meetups. There's no limit to the number of Meetups you can create. So you don't have to worry about whether the Meetup is efficient and is cleaning up a park, or just a bunch of people getting together to talk about sports. With Wusabe, the insight was let's eliminate the scarcity of financial advice. So now there's no scarcity of financial advice. You don't have to worry about how efficient each person's built of financial advice is. There's a reputation market there that takes care of that. The insight that Bug lacks is that there's an artificial scarcity in the challenge of ideas out into the marketplace. Let's open it up and eliminate that scarcity. Maybe the approach to using these technologies to disrupt philanthropy is not 126 to figure out how to increase efficiences and how to find the incentives. Maybe it's to liberate the outpouring. Whenever there's a Katrina, I worked with artists around the country to try and organize them and create registries so that when the next Katrina happens there's someplace for federal relief organizations to go to know where these people are. And because that didn't exist in the past, what happened in Katrina is artists went onto Craigslist. And they created their own little mini-artists resource on Craigslist, telling us, you know, the friends where the sculptor with the heavy objects was and where the gallery with priceless artwork was. All of that happened because there was no scarcity. You didn't have to worry about whether there was enough bandwidth for them to be able to put their notice on Craigslist. So it just occurs to me that rather than worrying about how efficient each dollar is, what if we eliminated, what if we opened the floodgates. What if we gave 127 people an opportunity to be generous. I believe that you can't explain all of human activity in terms of markets and firms. You know, there's nobody competing right now over the marketplace for air because there's no scarcity of air. On a colony on Mars there will probably be a marketplace for air. There's no marketplace right now. I don'thave to economize. I don't have two daughters. I don't have to cut my love for one by 7 percent so I can allocate another 7 percent to the other. These kind of thoughts don't come into our conversation. Yet, we've grown up in a culture that says there's a scarcity of funds. Philanthropic works have to be channeled through capitalist enterprise. Capitalist enterprise is agnostic to social value focused on profit. Therefore, there will always be a scarcity of funds available. What if we bypass the system entirely? MR. BURNHAM: You need something more concrete there. 128 First of all, I disagree with you on the notion that there is no scarcity. I think scarcity shifts. I think there are places the love of your children, I think information is a nonrival good. You can have it. I can have it. Actually, the bid source on Craigslist still has to find a home. But they're so inexpensive relative to the cost of a home. Apparently, there is no scarcity. But I think, and I think, frankly, when you get to the problem of how do you vett the people that are asking for loans in Kiva, there's a problem of time, you know. And how you deal with that. And I don't think, and people, if you're talking, asking to give money and/or time, there's scarcity of both money and/or time on the input side. You're not talking about a situation where there is no scarcity. What you are talking about is the information has these characteristics. Marty's talked about the characteristics. It is a nonrival good. You can create these information markets very 129 efficiently. We can use information markets to increase the awareness of the opportunity to give. You're still going to be giving out of a limited pool of capital because nobody has unlimited resources. So what is the specific proposal to eliminate scarcity on the input side? I don't see that. MR. GALIEL: If that was the proposal, we wouldn't be all sitting around the table. What I'm suggesting is a proposal, an approach to look at how we can create the effective tap into the fact that the transaction costs of information approached zero. And tap into the fact that on the Internet we have, basically, an effectively unlimited space. And see how we can use that to, rather than battle, to increase efficiencies. Bypass the whole problem altogether. This idea of eBay. What if there was an eBay geared towards social causes? Would you care, as Dick suggested, that there's, you know, an inefficient donor out 130 there? The problems get solved. 10 percent of our resources or 20 percent of our resources or 1 percent of o