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Doing the math

Quite a few people in the replies to Dan Pallotta's talk have noticed that the math shown is somewhat odd from time to time.

So let's discuss this in a seperate conversation rather than in the video thread.

My personal opinion (in this post) is irrelevant, I'll take a possition myself in the debate though but want the starting post to be as neutral as possible.

Because I would like everyone to use the same numbers I've went through the vid and wrote down all numbers he uses on his slides (I made the 'topics' of the slides myself as his slides didn't have any topics):
12% poverty in the USA

Salary in profit vs non-profit organisations:
Stanford MBA (at age 38) = 400.000 $
CEO of a medical charity = 232.658 $
CEO of a hunger charity = 84.028 $

AIDS rides bicycle (over a course of 9 years):
182.000 cyclists raised 581.000.000 $

Charitable giving in USA:
2% GDP (300 billion)

organisations crossing the 50M $ annual revenue barrier since 1970:
144 non-profit
46136 profit

Launch AIDS rides:
50.000 $ (risk capital)
108.000.000 $ after 9 years (and after expenses).

Breast Cancer 3 days:
350.000 $ investment
194.000.000 $ after 5 years (and after expenses).

5% overhead for a bake sale.
40% 'overhead' (or investment in growth) in a company.
(would anyone know what a non-profit organisation spends on average on 'overhead'?)

Current charity balance (where the 2% GDP goes to):
20% of charity goes to Health and Human services. (60Billion $)
80% of charity goes to Religion/Education/Hospitals. (240Billion $)

3% GDP (450Billion or an added 150Billion ontop of the before mentioned 2%).

Topics: charity math

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  • Mar 26 2013: I must say... the more time passes.
    The more I'm sure that what Dan really does is out-compete his fellow charities by using more money in organisation of fundraisers than the other charities do.
    Which eventually leads to "less money to the needy" than if he does not do this, as well as quite a few jobs in marketing / promotion / other jobs related to the events (like security/catering etc.).
    • Mar 30 2013: It is too speculative to presume that the revenue growth of one charity is to the detriment of others. While cannibalism within the charitable sector occurs, it isn't the sole means of growth, nor are these mutually exclusive.

      If marketing efforts can persuade a person to redirect some funds toward a cause, rather than toward any other purpose - whether that be entertainment, savings, etc., but not from pre-existing charitable behaviour (such as payroll deductions) - than the growth isn't from out-competing fellow charities. This form of growth is certainly achievable.

      Whether the lion's share of growth originates from within the charitable sector or external to it, will likely vary on a case by case basis. Speculation and generalization isn't constructive.

      Ideally, surveys and studies would accompany such charitable endeavours to uncover whether a donor redirected funds from one charity to another or increased his/her overall contribution. Again, ideally, an emphasis would be placed on those marketing efforts that result in the latter.
      • Mar 30 2013: My conclusion is more plausible than Dan's is though. Sure it's a bit speculative but at least it's supported by the figures that Dan shows.

        Dan's charities grew like crazy while % of GDP spent on charity stayed the same.
        So where did that money come from if not from the competitors? (One might say that his charities are too small to really make a significant difference in the % of GDP... but then there is not enough evidence for either conclusion which wouldn't make what I write any less likely than what Dan is talking about)

        His conclusions are a lot more far fetched than my own though. Where he sais that "giving a doctor a fundraising team which can use the 350.000$ makes more sense than giving the doctor 350.000$ for the research.".
        Say that you're a really smart doctor.... and rather than thinking "I really need that money" each year you use the generated $ to give another doctor a fundraising team which can use 350.000$. And he then does the same (so 1 doctor in the 1st year, 2 in the next, 4 at the 3rd year etc.).
        As according to Dan's numbers each of those will (after around 5 - 6 years) "make 200 Million $". (That is if they do not cannabalise eachother).

        You can already see that this isn't going to work... As within around 12 years spending on those charities will exceed GDP. (I didn't really do the math precisely for the '12 years' though but it feels correct as 2^(12-5) = 2^7 = 128 which then means that "at the very least 25,6 trillion $ is spent on gdp")
    • Apr 1 2013: This is true if the marketing does not bring in more money overall to charity. This is what he is talking about when going from 2-3% GDP. There are "windows of opportunity" that are frequently missed because no charity is there with open hands when a person is motivated to give. Kind of like how close a starbucks is has something to do with how many latte's you might buy.

      I think people want to help others and that motivates many of us. We look for opportunities, but need to be presented with them to act. Maybe you have Saturday free, and just heard a charity is doing a fundraising nearby. THe advertising got you to get involved. If there was no advertising, you would not have heard about it.

      In sales, it often takes 5 repeat visits to close a deal. Those first 4 visits are overhead. Getting people to realize that they can give and it makes a difference costs money. The more you spend, the more you make. Will there be mistakes? Certainly. But that is how you learn.
      • Apr 1 2013: Ah but he himself presents data which sais that the % of GDP never grew over the course of 20 years.

        While I'm sure that, because of the spread of televisions and computers, awareness of charities has grown significantly through the years.... Heck a lot of the "large charities" are so well known that they are considered to be common knowledge at quizes.

        So it cannot be that "if we just know" -> "we will spend more on it".
        • Apr 1 2013: Yes, but there is no law of nature that says it must stay there. This is what marketing is all about.
      • Apr 1 2013: You claim that when people become more aware of charities they will spend more on charities.

        I give you a logical conclusion of data that tells you that is not true.

        You re-state that it is true....
        If that is what marketing is all about then I suggest marketeers take courses in economics and logic

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