You Should Be Able to Get Rich in Charity
Harvard Business Review, by Dan Pallotta
There, I’ve said it.
There should be no limit to the amount of money a person can earn making the world a better place, so long as the money is commensurate with the value they produce.
If a person is a value-generating machine, and produces additional commensurate value for every additional increment of money they receive – and you can measure that value – then never stop the machine. And never let anyone else stop the machine. Let it keep producing value. Keep measuring it. And keep paying, without limit.
To limit the production of value in the service of social progress is the sin. Encouraging it is not.
It is not enough to say that people ought to be able to make a little more money in the nonprofit sector, or to say that financial incentive should be encouraged in charity as long as it is within limits. “A little” and “a limit” on the incentive side of the equation do nothing but produce a little and a limit on the value side. We shouldn’t be taking little and limited stands on issues for which the stakes are life and death.
The collective gasp we utter at the thought of anyone getting wealthy helping those who suffer is the axiomatic conclusion of our Puritan ethos about mixing money and meaning. That ethos is a cancer on our capacity to change the world.
Why should a person who wishes to bring the world a better mousetrap be able to know that he can get wealthy if he does it, while the person who wants to end hunger must know that he cannot? How can we expect people to fully pursue their dreams of bettering the world while denying them their economic dreams for themselves and their families?
Suppose a great and resourceful leader came along and said, “I will end world hunger within the next 10 years. That achievement will be worth billions upon billions of dollars of measurable value to society. Trillions, eventually. But if I achieve that goal, you must make me the wealthiest man in the world.” Would we do it?
Of course we would. Who would begrudge hundreds of millions of malnourished people the end of their suffering because of a disdain for the idea of one person becoming wealthy?
The answer to that question being obvious, traditionalists say, “It’s a flawed question, because money doesn’t have that kind of incentivizing power. Money cannot buy better talent.”
They actually say this. And people, in large numbers, actually believe them.
But they have not thought their argument through. Productive capacity varies from person to person. The price to purchase it varies with the capacity. And productive capacity is not fixed. You do not “buy” a person’s full productive capacity with the initial salary you offer them. Far from it. You keep buying units of a person’s potential, or not buying it, depending on the money you pay to encourage it.
The use of money, aka financial incentive, permits two things that the absence of it does not. It allows you to recruit from a more valuable talent pool, and it motivates the people you have recruited to produce more value than they would without it.
As for the initial “purchasing” power, what business professor would tell you that $1,000,000 does not allow you to select from a talent pool that is generally less fungible, less transferable, less replaceable, more experienced, and more productive than $50,000 would? You cannot argue that a hospital should offer a higher salary range to recruit its head of cardiology than to recruit its commissary cashier and then say that money has no bearing on the talent pool from which you can recruit.
You cannot argue that money does not incentivize people to do more in charity, and then offer raises when someone is promoted to a job in a charity that carries more responsibility, knowing that the person will expect a raise and would likely not accept the added responsibility without it.
You cannot argue that money does not incentivize people to do more, and then pay your event producer 10 times his per-event fee to produce 10 events, knowing that any other offer would be absurd.
And you cannot argue that economic incentive is not unlimited when you have never allowed the theory to be tested. The for-profit sector has tested it. And by the measure of Ford, Edison, Winfrey, Branson, Lauder, and many others, the combination of a dream for the world and a dream for oneself seems a pretty potent combination.
It is time we unleashed it on human suffering, without restraint.
That people should not get rich in charity is a kind of 11th Commandment. But it conflicts with the Golden Rule. Until we are ready to deny the rest of the economic world the fullness of their economic dreams, we must stop denying them to those whose dreams are of a better world.