Kenyan shilling. Photo by Claudia Daggett.

A few years ago four grad students from Harvard and M.I.T. decided they wanted to use their brains and dollars to improve the lives of some of the poorest people in the world. They researched different strategies of philanthropy, looked at the data available, and based on the evidence they chose a novel approach. No microlending, school-building, or vaccination campaigns for them: they would just give away cash, no strings attached. They called their new charity, simply enough, GiveDirectly.

The Concept

This is how it works: money is transferred from the organization to pre-identified families in Kenya via cell phones. GiveDirectly’s selection of recipients is based solely on need as signaled by mud or thatch roofs, as opposed to more durable materials. The standard amount is $1,000 over one to two years, about as much as a poor Kenyan family might spend in a single year. There are no restrictions on what a family can buy with money from GiveDirectly. Unlike with more traditional philanthropic efforts, there are no mandatory health check-ups or vaccinations, no obligatory training programs, and no mandates of any kind. The cash is completely unfettered. It is a “UCT”: unconditional cash transfer.

One common use of GiveDirectly cash transfers is the purchase of a metal roof. Mud and thatch don’t hold up well to weather elements and must be repaired or replaced often. There are major savings to be had with the purchase of a metal roof, which typically lasts at least a decade.

That’s not the only way in which recipients spend the money, however. If you own a motorbike in Kenya that can withstand the terrain, won’t break down on long journeys, and can carry a passenger, you can be a taxi driver. With an influx of cash, you can literally buy yourself a livelihood.

These sorts of purchases improve quality of life and increase earning capacity, and some even have a ripple effect beyond a single family. A cow, for example, can provide milk for an entire village, an income stream for the owner, and can create more cows to continue to multiply the benefits.

The Logistics

Since a normal transfer from bank account to bank account isn’t an option, and transportation and distribution of thousands of dollars of physical cash would require security and increase liability for the charity, the transactions are carried out via cell phone. In Kenya the “mobile-money system” is called M-Pesa, and it’s one of the most successful of its kind; transfers are discreet, simple, and perfect for this atypical exchange.

One M-Pesa location in Kenya. Photo by Fiona Bradley.

Using this technology, GiveDirectly can keep track of hundreds of recipient families with a single spreadsheet and send them money each month safely and securely. The recipient gets a text message indicating that the money has arrived and goes to his or her local M-Pesa franchise to pick it up (the one described in the radio show “This American Life”’s GiveDirectly coverage is basically a VW bus turned bank with a ledger, a box of cash, and one staff person). It might sound dodgy to the Western world, but the M-Pesa system is dependable and ubiquitous in Kenya and saves people time and money previously spent traveling to traditional banks or delivering money to family in remote and inaccessible areas.

The Evidence 

As Jacob Goldstein for the New York Times writes, “At its most basic level… GiveDirectly’s work is an attempt to test one of the simplest ideas in economics — that people know what they need, and if they have money, they can buy it.” As radical as the approach may seem, it is grounded in a strong evidence base. According to Holden Karnofsky, co-founder of a charity that supports GiveDirectly, “cash transfers…happen to be the most extensively studied non-health intervention we know of.” Indeed, traditional charities often call the very act of transferring funds into the hands of low-income people success. In GiveDirectly’s model, by contrast, the impact measures are more nuanced. Money changing hands is the intervention, not the desired outcome.

GiveDirectly is committed to investigating and recording its own impact. The organization recently completed a randomized control trial in Kenya, which reveals that; “recipients are not just spending their transfers, providing a one-time boost to their consumption without affecting their overall well-being.” The trial shows that food-consumption increased 20 percent for transfer recipients and the value of recipients’ livestock increased by 50 percent. The study even showed that recipients’ stress levels improved – their actual stress hormone levels decreased. The full report and a summary are available here.

The Implications

Pondering the broader lessons of UTCs and GiveDirectly, I’m reminded of all of the nonprofit organizations out there for which an influx of funding could really change their organizational “standard of living.” What GiveDirectly is providing goes by another name in the nonprofit sector: general operating support.

General operating support is the holy grail of nonprofit fundraising, defined by the Foundation Center as “grants for the day-to-day operating costs of an existing program or organization; also called unrestricted grants.” There may be reporting requirements Kenyans don’t have to adhere to, and an application process with more vetting than GiveDirectly’s system of identifying families in need, but the concepts aren’t too far off. The similarities between general operating support to organizations and cash transfers to families, however, might not be as obvious for some in the nonprofit sector.

“We had conversations with people [in the non-profit sector] who said there was a lot of internal resistance to unconditional transfers,” Niehaus [one of GiveDirectly’s four founders] told [reporter Dana Goldstein]. “If this works, what are we all here for? Why do we have jobs? There’s an industry that exists that tries to make decisions for poor people and determine what’s best for them.”

Shouldn’t we want the same kind of aid for the poor that we in the nonprofit sector would want for ourselves?

(By the way: I’m starting to think that I might standardize the section titles in the round-up. Any thoughts?)

ARTS AND THE GOVERNMENT

• Rhode Island is the newest state to recognize the L3C.
• Tim Mikulski reports on the activities of a new coalition that is revising the 1994 National Standards for Arts Education.
• What would a Republican campaign for higher office be without a little copyright infringement? It’s really kind of inconvenient for them that most of the karaoke klassics out there were written by hardcore liberals.
• The IRS’s list of nonprofits whose status was revoked apparently contained some errors – apparently George Washington University and the University of Michigan were included, for example. Whoops!

THE ART OF GIVING

• The Irvine Foundation has announced its new strategy for the arts focusing on audience engagement. The WolfBrown white paper written about on this blog last week is clearly a part of this. You can watch the video and join the discussion on Irvine’s website – Rocco Landesman has already kicked things off.
• Meanwhile, former San Francisco Foundation program officer John Killacky has something to say to his erstwhile colleagues in the grantmaking world.
• Hewlett Foundation President Paul Brest is back blogging, this time as a guest for Grantmakers in the Arts. In his first post, he points out that despite a major focus (and seeming agreement) within the funding community in recent years on the value of general operating support, there is little evidence of a pronounced upward trend in GOS grants. Change doesn’t come easy in the foundation world, I guess.
• Brian Newman wonders if the crowdfunding phenomenon exemplified by Kickstarter is, uh, crowding out donations from institutional funders.
• Finally, GiveWell offers a perspective on why we should expect giving effectively to be difficult.

MERGERS AND CLOSURES

• Arthouse at the Jones Center is exploring a merger with the Austin Museum of Art.
• Another orchestra down: The Seattle area’s Bellvue Philharmonic is no more after this weekend.
• Diane Ragsdale pays tribute to the now-defunct Florida Stage. The post also features a great and lengthy comment from National New Play Network Executive Director Jason Loewith.

APPOINTMENTS AND PROMOTIONS

• Lisa Philp will be the new Vice President for Strategic Philanthropy and Director of GrantCraft for the Foundation Center.
• Blogger, longtime executive director of the Center for Arts Education, and my former boss’s boss Richard Kessler will be the new Dean of Mannes College The New School for Music.
• Stellar Technology and the Arts blogger Amelia Northrup has taken on a new position as Strategic Communications Specialist at TRG Arts. Not content merely to share the news, Amelia goes out with a bang by sharing some fantastic tips for organizing your job search.

RESEARCH AND READINGS

• According to the latest Giving USA report, charitable contributions were up in 2010, but only slightly: 2.1%. The arts, however, fared better than most, seeing donations rising 4.1% after inflation. You might recall that Giving USA got some egg on its face earlier this year when evidence surfaced that its econometric models drastically underestimated the extent to which individual giving dropped during the recession. Now they say they’ve included another variable in the model that explains the drop, so this year’s estimate should (hopefully) be more trustworthy.
• With all the talk about eliminating or reducing the tax deduction donors receive for their charitable gifts, kudos to Sarah Lutman for digging into the Congressional Budget Office’s recommendations on the subject.
• Theatre Bay Area has published a report on social media use by arts organizations, authored by our friend Devon Smith of Threespot Consulting. Devon has her own account here.

ACROSS THE POND

• Going England one further, the right-wing government of The Netherlands is set to cut its arts funding by 25% and more than triple the tax on tickets to concerts. Sadly, the powers that be have chosen to let smaller arts organizations bear most of the burden – an especially heavy one since unlike here, government funding makes up the vast majority of revenue for most. Recommendations to phase in the cuts were ignored.
• Michael Kaiser reports from a trip to England (part I; part II); Michael Royce checks out the arts scene in Berlin (part I; part II; part III).
• Weirdness: a Chinese firm has contracted Albert Speer & Partner to build an exact replica of the Austrian village of Hallstatt – in Guangdong Province.
• Weirdness: Norway is apparently training its own diplomats how to explain black metal.
• Weirdness: a city in India has no municipal government – and is apparently doing pretty well. Marginal Revolution and Matt Yglesias provide interesting commentary.

BIG IDEA CORNER

• Meant to mention this last time around – National Arts Strategies is launching a cool-looking initiative designed to help CEOs become more effective leaders. Andrew Taylor provides his customary brief summary.
• Lee Streby has an extraordinary three–part exploration on what he would do if he were building an orchestra from scratch. And speaking of orchestras, Greg Sandow has been musing on how we might objectively evaluate the quality of their performances.
• Sasha Anawalt, Doug McLennan, et al. set up a five-day “pop-up newsroom” called Engine 28 last month to cover live theater convenings and events in LA. The LA Times has more.
• Dollars and sense: Assets for Artists is looking to expand beyond Massachusetts. Gary Steuer draws the line between arts education and economic development. Barry Hessenius on a different kind of arts endowment – and how we might fund it. And since I’m always a sucker for people questioning the premises behind microeconomics, here’s Justin Wolfers recounting how being a father has made him question the neoclassical model; and Seth Godin on why coordination, not competition, is the next frontier for economics.
• If you’ve ever played the mobile/tablet game Angry Birds, you know how addictive it can be. Now the company that makes Angry Birds, Rovio, is launching a totally visionary location- and accessory-based scavenger hunt in which visiting various special places in real life activates Easter egg features in the game. This is some seriously creative shit that arts marketers should be paying close attention to.

One of the memes that’s been coming out of the “best practices” camp for philanthropists the last few years is that organizations need more general operating support, rather than the project support that many funding entities are accustomed to providing. The advantage of general operating support (or GOS) is that it can be shifted around to different parts of the organization depending on needs, rather than being tied up in one program that may turn out to be overfunded relative to other priorities or encounter unforeseen problems. A funding base that is heavy in GOS thus gives a grantee much greater flexibility with which to design its offerings, which is appropriate because organizations on the ground are likely to understand their constituencies better than their funders (and certainly better than a haphazard aggregate of funders that may have different priorities and agendas at stake, which is pretty common in this field).

One of the dangers of project support, when pursued too zealously, is that it can take the funded organizations away from their core mission—and often, then, their core competencies. Grantmakers need to remember that any money they have to offer, no matter how small it may seem to them, acts as a powerful incentive to those on the other side scrounging for every penny they can. Attaching program-related restrictions or conditions to the use of funders’ money may direct attention to the causes or ideas in which they are interested, but the long-term effect on the field can sometimes be deleterious if organizations are jockeying among themselves for opportunities that take resources away from what they are actually good at.

I think the same principle can be applied to artists, either when they are funded directly or when their activity is supported through a grant to an organization. A composer or a playwright is not like a graphic design shop or an IT consulting firm that will create something to a customer’s specifications, no questions asked. The whole point of supporting the arts, to my mind, is to encourage innovation, expectation-challenging, and all what goes along with leading a creative life. Laying out the path ahead of time with too-great specificity potentially squashes the very thing that makes the arts special. What’s more, the non-alignment of incentives that I talked about in the previous paragraph is even more severe for individual artists trying to make a living from their creative work. I’ve seen projects in the music world greenlighted for little reason other than the possibility of getting a grant for them. Were those always the best projects to undertake, either for the organizations/artists themselves or for the field as a whole (e.g., audiences)? For example, if the most talented artists are unwilling to create works to specification, does that mean that less talented artists receive those opportunities instead and ultimately become better-known to the public as a result? Or if a high-dollar-value grant also includes an educational workshop component, will the panel end up selecting a fine composer who is terrible in the classroom?

Furthermore, I can tell you from my own experience and that of my friends that it is somewhat demoralizing for an artist if the only realistic path to receiving anything resembling professional compensation is to create a work that has nothing to do with what you’re about. Artists are very invested in creating public identities that reflect their personal aesthetic goals and ideas—not to mention devoting their limited creative time and resources to projects that similarly reflect those things. If you’re a creator-for-hire, it’s much harder to maintain that kind of integrity and voice in your own work. It’s a choice that many artists trying to make a living must grapple with.

I would like to think that most philanthropists who truly believe in the arts can trust creators enough not to try to do their work for them. Of course there could be occasions when highly directed creative activity is entirely warranted. This is not a black-and-white issue. But in general, I think it’s worth considering the potential unintended consequences of a “top-down” strategy of arts giving, especially if that strategy becomes the norm.