Americans give $1 billion per day. What is their ROI?
Nonprofits account for 1 in 10 jobs in the American economy. What is their social impact?
These two questions point to the promise and perplexity of giving and serving in America. In contrast to economies at the base of the pyramid where social distress is compounded by inadequate capital and inferior infrastructure, American poverty grows amid a torrent of public and private dollars offered for its remedy.
The American dilemma, therefore, is that the promising supply of capital meets the perplexity of its meager outcomes largely because it’s a big business that doesn’t act like one. Without investment discipline and good business practice guiding the dollar given and service performed, the market turns on an irrational exchange of emotionally-driven donations subsidizing performances measured by activities and anecdotes over results.
As the sons of Issachar used uncommon wisdom to catalyze leadership to redeem Israel, so too must Christ-followers reclaim the full meaning of Christian stewardship to redeem American generosity. What does this look like? Among other things, it is to give sacrificially, to view the poor as image-bearers of God, and to seek a return on investment in keeping with the Parable of the Talents.
Harvard sociologist Robert Putnam has conducted vast sociological research demonstrating that Christian neighborliness accounts for disproportionately large amounts of charitable donations and volunteer service. Faith is clearly the number one factor in American giving. Now is the time to add efficacy to our profile.
American Renewal… One Community at a Time
The idea of effective compassion is what forged a partnership between Dan Coats and me in 1999. At that time Coats was retiring from the United States Senate with no plans to return to elected office. With $400,000 converted from his political campaign organization into a public charity and a $100,000 donation from his friend Foster Friess, Dan and Marsha Coats created the Foundation for American Renewal (now known as Sagamore Renewal Fund).
Senator Coats asked me to run the foundation on the dual tracks of research and demonstration of results-oriented giving. We knew that effective compassion had two components—faith and community—but we didn’t yet have a plan to make indigenous Christian enterprise mainstream.
Throughout the 1990s, Coats had used his national platform to urge a new path forward in poverty fighting. He sponsored the Project for American Renewal to advance non-government solutions through tax credits and innovations. These included the restorative justice practices being carried out by his friend Chuck Colson at Prison Fellowship.
On leaving office and becoming a private citizen, Coats wanted his foundation to fuel a movement among Christians to lead the way by giving more (wisely) and serving more (effectively). He asked me to design a strategy to achieve this vision. My first move was to find a set of partners who understood the times and were active in reshaping it. Each of these partners, highlighted in bold font below, serve respective sides of the supply and demand equation. We have joined them in seeking answers to three key “theory of change” questions:
- WHY SHOULD I GIVE? – Generous Giving advances a theology of Christian generosity, emphasizing that God owns it all and thus we are stewards not owners of wealth. Our task is to determine the purpose for which God has prospered us.
- HOW SHOULD I GIVE? – The National Christian Foundation is the leading vehicle to increase giving through tools and techniques—shifting tax dollars into charitable giving, deploying non-cash gifts, and much more. iDonate is another partner of our foundation in this space.
- WHERE SHOULD I GIVE? – Mission Increase trains faith-based nonprofits nationwide in biblically-based fundraising principles, which forges shared ministry connections with their donors. Mission Increase also possesses the most comprehensive data on social enterprise in American communities.
To enhance our work with these partners and to supply our foundation’s thought leadership, we hired Dr. Amy Sherman to direct the Center for Faith in Communities from her Charlottesville, Virginia office. Among Sherman’s contributions is the development of the most robust knowledge management system for frontline faith-based charities (www.fastennetwork.org). In addition, her book, Kingdom Calling, has become one of the most authoritative books on vocational stewardship.
The key verse of Sherman’s book is Proverbs 11:10: “When the righteous man prospers, the city rejoices.” Of course, normally there is resentment, not rejoicing, when the have-nots observe the prosperity of the haves. Sherman explains, however, that the “righteous” (tsaddiqim) used their prosperity to uplift the poor, restore broken places, and otherwise help build God’s kingdom on earth as it is in heaven. This leads to rejoicing—not a golf clap but rather slack-jawed wonder, similar to the Romans’ reaction when they observed Christians running into the plague to care for the dying even as they (the Romans) abandoned their own families for
personal safety.
From the White House to Rwanda
After we launched the foundation and created a think tank called Sagamore Institute to further thought leadership on social reform, I was invited by President George W. Bush to direct his White House faith-based initiative. I was honored to assist the president in his justice agenda that deployed United States government resources to fight AIDS in Africa, restored prisoners through mentoring, launched an unprecedented attack on human trafficking, and invested in turning around blighted urban economies among many other things. Yet in this position I discovered that government was simply a minority partner in reshaping society.
Working with the Council of Economic Advisors, we compiled data to illustrate that private capital far outpaced public capital in solving problems. America’s nonprofits comprise over 5% of the nation’s GDP and they hold nearly $5 trillion dollars in assets. And while America’s foreign aid budget is an impressive $20 billion per year, the number is dwarfed by the $150 billion sent to the developing world through American citizens, churches, and various diasporas.
To make the case that private citizen-tocitizen engagement would be the 21st century development model, I hosted a White House conference in Rwanda featuring President Kagame along with American investors in Rwanda’s rise such as CEF advisor Dale Dawson. Following the conference, Dale and I formed a think tank called ISOKO to create and expand enterprise solutions to poverty.
A Capital Idea
Dale Dawson’s inspiring Rwanda story is a vibrant chapter in a rapidly growing global narrative reforming aid and enlarging foreign direct investment. This trend will only accelerate in the years ahead, as evidenced by the Omidyar Network’s forecast that a $3 trillion “frontier capital” market will form at the base of the pyramid.
Harvard competitiveness guru Michael Porter has been a partner of Dawson’s in Rwanda. Porter has more recently begun transferring some of the emerging market innovations to America’s inner cities. This brings us back to the unique problem of poverty amid plenty. Porter notes that a square mile radius in a high poverty neighborhood produces more income wealth than a square mile radius surrounding a wealthy suburban neighborhood. How can this seeming contradiction be explained? The answer is density.
This brings us to another question. If there is so much wealth in high poverty neighborhoods (at least compared to the rest of the world), how can they exist? Proverbs 13:23 notes that the unplowed fields produce food for the poor but injustice sweeps it away. Such is the case in America’s poor neighborhoods, thanks to usurytype lenders charging interest of 20% and higher for borrowed money and food deserts that arise when grocery stores close.
“Now is the time for the new sons of Issachar to show the world a better way of social investment.”
To help repair these broken economies, our foundation has launched an impact investing fund of funds. This will use private equity discipline to turn social innovation into sustainable enterprise and private investment into social impact. The funds will operate within three stages of investment:
- Leveraged Grantmaking – In tandem with
Mission Increase training in communities across the nation, we offer venture philanthropy investment in nonprofits with various leverage tools (tax credits, matching gifts) and adherence to strict Social Return on Investment measures. - Venture Capital – These funds will be available for investors interested in high social impact and risky or modest economic returns.
- Private Equity – These funds will be available for investors interested in high economic returns and more modest yet meaningful social impact.
The goal of all three investment options will be to produce good business to enliven human flourishing. It is surprising that giving and serving in America is big business and it’s unacceptable that it’s bad business. Through management discipline, investment techniques, and resultsoriented service measured by economic and social returns, the business of doing good can be put in place before it’s too late.
Americans will transfer $30-40 trillion over the next 30-40 years. Most of the inheritors will be women and millennials, both of whom are highly generous and favor impact investing. This transfer will likely result in $1 trillion annual social investment within a couple decades. Without the implementation of good business practice, these amounts will achieve little joy for the giver and little benefit to those who need it most.
Now is the time for the new sons of Issachar to show the world a better way of social investment.
“As the sons of Issachar used uncommon wisdom to catalyze leadership to redeem Israel, so too must Christ-followers reclaim the full meaning of Christian stewardship to redeem American generosity.”
JAY HEIN
President | Sagamore Institute
JAY HEIN is the president of Sagamore Institute, a think tank he co-founded in 2004 with U.S. Senator Dan Coats. From 2006-08, Jay served as Deputy Assistant to President Bush and Director, White House Offi ce of Faith-Based Initiatives. In this capacity, he advised the president and oversaw the implementation of a “determined attack on need” with staff at a dozen cabinet agencies.
In tandem with his Sagamore duties, Jay also serves as managing partner of ISOKO (an African think tank founded by CEF participant Dale Dawson), as founder of a faith-based Private Equity fund called Kairos, a visiting fellow at the Center for Social Justice (U.K.), and as a fellow at Baylor University’s Institute for the Studies of Religion.
Prior to Sagamore, Jay directed Civil Society Programs at Hudson Institute and served as a welfare policy advisor to then-Wisconsin Governor Tommy Thompson.
Jay is the author of The Quiet Revolution: An Active Faith That Transforms Lives and Communities, which was commissioned by Amazon to help launch its new faith-based division. He received an undergraduate degree at Eureka College and an honorary Doctor of Laws from Indiana Wesleyan University.
Jay and his wife Mary Jo have three children and one grandchild.
