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Should you be for-profit or nonprofit? Why not both?
Cutting edge social innovators should consider hybrid models
Rich Tafel is founder of The Public Squared, a public policy training program for nonprofits and social entrepreneurs.
For the last decade, Tafel has provided strategic policy advice to nonprofits on a variety of causes, including AIDS programs for Africa, civil rights programs Latin America, and education and health care reform in the United States. He is a guest lecturer in Urban Health and Advocacy at Johns Hopkins University.
Prior to his international consulting, Tafel founded the Log Cabin Republicans in 1993. During his tenure, the Log Cabin Republicans went from an unknown entity to a well-known brand in American political life. At the height of the culture wars, he debated the likes of the Reverend Jerry Fallwell on Larry King Live. He has appeared on most major political TV programs and fought for appropriate AIDS funding and equality for gays and lesbians. He testified before Congress on the need to support the Ryan White Care Act. In 1999, he authored Party Crasher: A Gay Republican Challenges Politics as Usual. Tafel has also been appointed by Governor Weld (R-MA) to manage the adolescent health programs of Massachusetts.
Tafel's work in the public policy arena for social justice causes is inspired by his faith. After graduating from Harvard Divinity School he served at the University Chapel. He is an ordained minister in the Swedenborgian Church. He is a certified coach through Franklin Covey and certified through the International Coaching Association. He's an alumni of the Prince of Wales, Business and Sustainability Program, Cambridge College.
Over the past fifteen years, I've had the opportunity to provide strategy for well over a hundred social change start-ups seeking to make the world a better place. The most common question they ask, "Should we be a for-profit or a nonprofit."
My answer, "Why not consider both?" Let's review the advantages and disadvantages.
The nonprofit optionHuman hands holding polygonal heartHuman hands holding polygonal heart. Love, peace and donation concept. Charity event. Vector illustration for non-profit organisation
The nonprofit option is the most popular choice with over $410 billion given to 1.5 million nonprofits last year alone. Nonprofit leaders report back to me four primary advantages to this legal structure:
- "My donors get a tax deduction."
- "Foundations prefer giving to nonprofit entities."
- "Nonprofits have a good brand in our culture."
- "We don't have to pay taxes!"
They also cite three major disadvantages:
- "I feel like I'm in constant fundraising mode—I'm chasing donors not solving problems."
- "Instead of seeing our impact, donors scrutinize my salary and overhead costs."
- "No matter how much sweat equity I put into my work, I have no financial gain to show for it."
Impact investing for for-profit social ventures
The rise of impact investing into for-profit social ventures makes this is a powerful alternative to the nonprofit model. The Global Impact Investing Network reported that "225 investors, including pension funds, invested $35.5 billion across 11,136 impact investment deals in 2017. That is up 58% from $22.1 billion across 7,951 deals in 2016." That $35 billion is getting pretty close to the $66.90 billion donated by charitable foundations in 2017.
Nonprofit leaders are also looking toward for profit earned income as part of their future as well. A recent Bridgespan Group survey of US nonprofits' executives reported they "believe earned income would play an important role in bolstering their organizations' revenue in the future." According to Echoing Green, a nonprofit with a 25-year record of supporting early-stage social entrepreneurs, the proportion of their applicant pool proposing for-profit and hybrid organizations has grown to nearly 50 percent, compared to 15 percent in 2006.
For-profit social ventures name three primary advantages to choosing this model.
- "I no longer feel like I'm begging donors year in and year out."
- "There's untapped capital out there without sufficient social ventures to invest in."
- "We put in our own sweat equity and as owners, I might get a great long term financial return for my work."
Social ventures also described to me three disadvantages.
- "I don't know how to find impact investors."
- "We aren't able to get funding from foundations or other traditional donors."
- "It's hard to measure and report out both impact measurement and return on investment to investors."
Hybrid models that include both for-profit and nonprofit entities can maximize the advantages of each model, while minimizing the disadvantages. These hybrids come in many shapes and sizes.
A Case Study: Town Stages
A Town Stages production space
A good examples of a hybrid model was reported in Forbes magazine by Carey Purcell. In the article titled, "How a 'Robin Hood' Business Model Supports an Artistic Clubhouse in Tribeca," she tells the story of Town Stages LLC a "female-driven cultural institution and event venue owned by a nonprofit Sokoloff Arts." The founder Robin Sokoloff wanted to provide spaces to work and live for artists like herself to survive ever-rising NYC rent. Town Stages, with space rentals for weddings, bar mitzvahs, and business events, subsidizes Sokoloff Art fellows.
Artists can rent the space at the rate they can afford, and the revenue is used to subsidize other emerging artists. Not only does she provide spaces for artists, but her organization is also focused on the advancement of young women, minorities, and LGBTQ voices. Town Stages has become a home for underrepresented voices in the community and was able to expand its impact thanks to the success of her first artistic hub. Since 2012, they allowed 70,000 people to create almost 900 different works of art.
Social Venture hybrids have some profound advantages, especially when it comes to fundraising and equity. In particular, they allow the social venture to say "yes" to both impact investors and traditional foundations. They allow social entrepreneur teams to be owners and get a financial reward for the unpaid time they invest in the cause.
"Guard Rails" required
Hybrids also have the disadvantage of requiring more well thought out accounting "guard rails" to make sure the organization operates legally — nonprofit money must always serves the public interest, not someone's private interest. Arron M. Fox CPA at the Senior Tax Manager, at Raffa, Marcum's Nonprofit and Social Sector Group describes one way to create a hybrid model called a for-profit subsidiary in his piece "Considerations When Creating a For-Profit Subsidiary."
Rich Tafel is the Director of Raffa Social Capital Advisors - Marcum's Nonprofit and Social Sector Group
Marcum LLP. Rich.Tafel@MarcumLLP.com
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How a study on worms pointed the way towards a treatment for dementia
- An increasing amount of research suggests that failures in phase transition within cells can cause a variety of aliments
- The mechanism is believed to involve the inability of moleclues to move from solid to liquid and back, inhibiting cellular function.
- The discoveries open the door to treatments for neurodegenerative disease, some cancers, and other illnesses.
All matter is just going through a phase.<p>Think of liquid water for a moment. If you put it in the freezer, it'll turn to solid ice. Leave it out, and it will melt again. Boil it or leave it outside on a hot day, and it will all turn into water vapor eventually. This change in state is called a "<a href="https://chem.libretexts.org/Bookshelves/Physical_and_Theoretical_Chemistry_Textbook_Maps/Supplemental_Modules_(Physical_and_Theoretical_Chemistry)/Physical_Properties_of_Matter/States_of_Matter/Phase_Transitions/Fundamentals_of_Phase_Transitions#:~:text=Phase%20transition%20is%20when%20a,combination%20of%20temperature%20and%20pressure." target="_blank">phase transition</a>" and is familiar to most people who took some physics or chemistry. </p><p>Phase transition sometimes takes place in cells. Molecules inside cells responsible for cellular metabolism can change from solid to liquid to carry out specific tasks. However, it occasionally happens that the process that allows this to happen breaks down, and the molecules remain a little more solid than is ideal. This means that the molecules are no longer able to move around the cell and do their jobs. <br> <br> When this happens in certain cells in the brain, toxins associated with Alzheimer's disease and various other conditions start to build up in and around the cells. This discovery, based on previous studies from 2009, is the foundation of a theory on how neurodegenerative diseases start in our brains. </p>
How did scientists develop this theory?<div class="rm-shortcode" data-media_id="aBJpp9J4" data-player_id="FvQKszTI" data-rm-shortcode-id="134616cefd3c5c6b756c407590ea3f91"> <div id="botr_aBJpp9J4_FvQKszTI_div" class="jwplayer-media" data-jwplayer-video-src="https://content.jwplatform.com/players/aBJpp9J4-FvQKszTI.js"> <img src="https://cdn.jwplayer.com/thumbs/aBJpp9J4-1920.jpg" class="jwplayer-media-preview" /> </div> <script src="https://content.jwplatform.com/players/aBJpp9J4-FvQKszTI.js"></script> </div> <p>In 2009, a group of scientists discovered phase transitions and their importance in worms' reproductive cells<a href="https://science.sciencemag.org/content/324/5935/1729.full#otherarticles" target="_blank"></a>. For reasons which are probably clear to you, this study didn't garner much attention right away. After a few years, the idea that glitchy phase transitions could cause a variety of issues gained some traction, and studies on phase transition in human brain cells took <a href="https://www.nature.com/articles/s41582-019-0157-5" target="_blank">place</a>. Dr. J Paul Taylor even won the <a href="https://www.potamkinprize.org/" target="_blank">Potamkin Prize</a>, awarded for excellence in dementia research, for work concerning how faulty phase transition relates to neurodegenerative diseases.</p>
What directions does this point in?<div class="rm-shortcode" data-media_id="cRIAffgd" data-player_id="FvQKszTI" data-rm-shortcode-id="ae687302c209d641b6e6395a8d8bff74"> <div id="botr_cRIAffgd_FvQKszTI_div" class="jwplayer-media" data-jwplayer-video-src="https://content.jwplatform.com/players/cRIAffgd-FvQKszTI.js"> <img src="https://cdn.jwplayer.com/thumbs/cRIAffgd-1920.jpg" class="jwplayer-media-preview" /> </div> <script src="https://content.jwplatform.com/players/cRIAffgd-FvQKszTI.js"></script> </div> <p><a href="https://www.npr.org/sections/health-shots/2020/07/08/888687912/new-clues-to-als-and-alzheimers-from-physics" target="_blank">In his NPR interview,</a> Dr. Taylor suggests that treatments for Alzheimer's and related diseases based on this new understanding could be available in a few years. In the same article, Dr. Clifford Brangwyane of Princeton explained that some experimental treatments have already shown promise in correcting the issues. He also suggests that phase transition treatments could be used against other illnesses and perhaps even some cancers.</p><p>Sometimes tremendous scientific advances are born out of the strangest studies. In this case, a potential treatment for a variety of terrible neurodegenerative diseases traces its roots to a study of worms. More bizarre things have happened in science.</p>
A new study lays out the case for the damaging effects of stress on orcas living in tanks.
- There are currently around 60 orcas living in concrete tanks globally.
- Orcas' brain structures and behaviors strongly suggest smart, emotional, self-aware beings.
- The study provides compelling evidence that the stresses inherent in captivity do damage to these naturally free-roaming cetaceans.
A study, "The harmful effects of captivity and chronic stress on the well-being of orcas (Orcinus orca)" recently published in Journal of Veterinary Behavior is the product of a unique collaboration of experts in marine mammal science, veterinary science, internal medicine and psychiatry. It makes the case for a careful consideration of the impacts of chronic stress on captive orcas, at least 60 of whom are currently in captivity. Most have spent years or decades of their lives in these conditions. 56.7% of these orcas were born in captivity, with 26 captured young. (Orcas are actually the third most commonly confined cetaceans — there are even more bottlenose dolphins and beluga whales held in tanks.)
The study explains how the continual, oppressive stress inherent to a captive orca's life is unhealthy and should be more thoughtfully addressed. Study lead author biopsychologist Lori Marino tells Big Think in an email:
"Our review shows that intelligence, complexity, and awareness are characteristics that make an animal more — not less — vulnerable to the effects of captivity. That seems counterintuitive because a lot of people think that the more mental resources you have the better you are able to cope with various situations. But it is also the case that the more mental capacity you have the greater your needs in order to thrive and the more extreme the impact of living in an artificial environment, that is, an environment outside your adaptive envelope."
While skeptics may consider it a leap to assume that orcas are intelligent and emotional enough to suffer the ill effects of stress, Marino responds, "That would be a claim in search of evidence. Stress is a common phenomenon in all mammals and many other organisms. The effects of chronic stress have been well-studied in mice, rats, dogs, etc." The study provides ample evidence that orcas are exceptionally intelligent, feeling creatures in any event.
The orca brain
Image source: FineShine/Shutterstock
The orca brain exhibits neurobiological traits that are considered prerequisites for complex psychology, emotion, and behavior:
- a large brain size
- an expanded neocortex
- a well-differentiated cortical cytoarchitecture
- an elaborated limbic system.
Even more important than sheer brain size is its size in relation to an animal's body. This is captured as the organism's encephalization quotient, or EQ. Says the study, "Odontocetes, and in particular Delphinoidea [the superfamily to which orcas belong], are the most highly encephalized nonhuman taxonomic group known … except modern humans."
Orcas also have the most highly convoluted, or folded, neocortical surface of all mammals including humans, and their ratio of neocortical surface to brain weight also exceeds the human brain's, suggesting an organ well-suited to higher-order functions.
Among a range of other clues presented by the study that suggest orcas are highly intelligent creatures are these:
- Areas associated in the human brain with high-level cognitive and social functions including attention, prediction, social awareness, and empathy are all highly developed in orcas.
- Orcas have a well-integrated mammalian limbic system that supports having emotions, memory, motivation, reasoning, learning, and abstraction.
Image source: Willyam Bradberry /Shutterstock
Observations of orca behavior richly supports the implications of their neurobiological structures. Marino says, "Free-ranging orcas live in tightly-knit social groups that are necessary during their long juvenile periods and afterwards. They support each other, help each other when in trouble, and grieve each other. Mothers and calves are very tightly bonded. In some groups, male orcas stay with their mom their whole life and if mom dies [the male offpsring] may go into a deep depression and die as well. Family and social group are everything."
Orcas also demonstrate culture, with vocalizations and even hunting methods unique within groups and passed from generation to generation.
"Orcas at Punta Norte, Argentina, hunt sea lion and elephant seal pups by beaching themselves and capturing the pups, typically in the surf zone," according to the study.
Image source: Peter Etchells/Shutterstock
In the wild, free-ranging female orcas live an average of 46 years — some live as long as 90 years — and males 31 years, or as long as 50-60 years. Captive orcas rarely live more than 30 years, with many dying in their teens or 20s. Their medical histories can be difficult to access due to facilities' desire for confidentiality. Nonetheless, some morbidities, or causes of death, have become clear over time.
One review from 1979 identified infectious disease as the culprit behind the death of 17 captive North American orcas who'd died since 1965 prior to the report's writing. The new study cites publicly available documentation revealing that between 1971 and 2017, SeaWorld parks alone have experienced 35 documented orca deaths, and that, "When causes of death were available, the most commonly implicated conditions were viral, bacterial and fungal infections, gastrointestinal disease, and trauma."
Infections such as these may not in and of themselves have necessarily been lethal, but when combined with orcas' "weakened immune system, chronic exposure to chemical irritants or trauma to the skin, excessive or improper use of antimicrobials, and an imbalance in the microbiota of the body or environment (which may exist in tanks)," they become deadly. Common fungal infections may also especially dangerous in this context "as a result of long-term and aggressive antibiotic treatment, overtreatment of water for purity, or both." The same is true for untreated dental infections.
Another frequent cause of orca death: gastrointestinal ulceration — ulcers — caused by prolonged exposure to stress.
The destructive power of stress
Image source: eldeiv/Shutterstock
"Importantly, the poor health and short lifespans of captive orcas are most clearly understood as connected elements in a cycle of maladaptiveness to the conditions of captivity that involves behavioral abnormalities, physical harm and vulnerability to disease."
The paper shows, says Marino, that "when you examine the totality of the welfare findings for captive orcas the whole picture fits best within a larger common framework of evidence on how stress effects captive animals. We know that, when confined, other animals show the same kinds of behavioral and physiological abnormalities that captive orcas do. This is not mysterious or even controversial. It is basic science."
Marino cites as especially damaging the manner in which captivity prevents orcas from making social connections. Tanks also deprive them of places to retreat, making conflicts inescapable even temporarily. Finally, captive orcas are likely to become bored and chronically demotivated by the frustration over their loss of autonomy.
The study also notes physical effects brought on by long-term stress, including:
- the release of too much cortisol by the hypothalamus-pituitary-adrenal, or HPA, axis, causing elevated blood sugar, suppression of the immune system, as well as metabolism and blood pressure issues.
- alterations of the hippocampus, amygdala, and prefrontal cortex due to prolonged stress, potentially leading to Increased anxiety, post-traumatic stress, cognitive impairment, depression, and mood dysregulation.
- organ degradation in response to unrelenting stress.
- a loss of natural sensory information, about which, says the study, "a growing body of research has found that exposure to excessive or unnatural levels or types of acoustic input can cause a number of impacts to cetaceans, including but not limited to … accelerated aging, suppression of the immune response, as well as premature hearing loss."
A valuable conversation
Marino explains why it was important to conduct this study, saying, "My co-authors and I wrote this review to bring all of the available information on captive orca well-being together in one place and to suggest that we might all best be able to understand the effects of captivity within a very familiar and well-researched model of how chronic stress effects all organisms. We want this paper to be a catalyst for dialogue and further scientific exploration based on data as to how we can better understand who orcas are and how we can identify the important elements needed in a captive environment for them to thrive."
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