Charities must change their economic model, TED Talk speaker says

Dan Pallotta urges Palm Beach County nonprofit leaders to embrace NASA-like coordination.

Dan Pallotta has an urgent message for Palm Beach County philanthropists, nonprofit leaders and the community they serve.

• “The nonprofit sector is in an economic prison,” the TED Talk speaker told nearly 300 people in a virtual conversation last week at the Kravis Center. 

Why it’s important: There are 8,000 nonprofit organizations in Palm Beach County. Each of them is charged with keeping their operating expenses low, a value that Pallotta rejects.

• And all of them could be more effective if they joined together, he insists.

In the conversation presented by entrepreneur and philanthropist Lisa LaFrance, Extraordinary Charities and Nonprofits First, Pallotta talked about the coordination it took for NASA to get to the moon. 

• During the peak of the Apollo program, 400,000 private sector employees made components of the project, he said. “NASA had 40,000 full-time employees. They didn’t build anything. All these 40,000 people did was coordinate the work of the 400,000.”

What he’s saying: ”We have utter chaos in our communities, and we try to solve the problems in silos. How do we band together to create NASA-like coordination?” 

By the numbers: At the time of the TED talk, a 38-year-old executive with a Stanford MBA could command an annual salary of $400,000, Pallotta said. The CEO of a medical charity with a $5 million annual budget made $233,000. The CEO of a hunger charity: $84,000. 

• “There’s no way you’re going to get a lot of people with $400,000 talent to make a $316,000 sacrifice every year to become the CEO of a hunger charity,” Pallotta said. “It’s cheaper for that person to donate $100,000 every year to the hunger charity, save $50,000 on their taxes and still be roughly $270,000 ahead of the game. And now be called a philanthropist.”

Nonprofits are also held back when it comes to spending transformative money on advertising and marketing, fund-raising and taking risks on new money-raising ideas, he said.

Flashback: Harvard-educated Pallotta launched multi-day bike rides to finance AIDS research and walks to fight breast cancer that raised hundreds of millions of dollars. His enterprise collapsed in 2002 after criticism that too much money was spent on fundraising and staff.

• The experience led Pallotta to give his 2013 TED Talk, which has been viewed more than 5 million times, write a book and make a movie. All are designed to get charities to embrace moon-shot ideas and take risks like businesses do. 

Pallotta’s advice: “What problem do you want to solve and by when?” he said. “Donors want us to solve problems. Stop boring them to death with ideas that aren’t going to make a difference.”

The big picture: Pallotta pointed to collaborative organizations in Dallas, Syracuse and Utica, N.Y., and Fort Myers. “We can’t get big solving one problem,” he said.

• In 2021, the Southwest Florida Community Foundation rebranded as Collaboratory and committed to conquering homelessness, unaffordable housing, mental illness and institutional racism by 2040.

Could a social enterprise collaborative happen here? “This is just the beginning of this discussion,”  LaFrance said after the talk. “The time to finally address these challenges is now and the Palm Beach County community is ready.”  

On Saturday, LaFrance announced she is dedicated to establishing and leading the Department of Nonprofit Efficiency (DONE) aimed at revolutionizing the nonprofit sector.

• “By streamlining operations and fostering innovation, we will unlock the sector’s full potential to address the critical challenges we face. Our goal is to drive more funding into impactful solutions. ensuring that by 2040, many of these challenges will be resolved,” she said in a statement emailed to Stet.
• “Palm Beach is uniquely positioned to lead this change. By becoming a hub of social impact and a model for the nation, we can achieve something greater than landing on the moon – lifting our entire community to new heights.”

Find out more:

• A funders’ panel hosted by Nonprofits First is planned at 2:30 pm March 18 at Keiser University. For more information and to register, visit nonprofitsfirst.org.
• Watch Pallotta’s TED Talk: “The way we think about charity is dead wrong.”