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Adventures in Philanthropy: Taking Risks, Breaking Ground

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Funding change is tricky, subject to a thousand contingencies - but worth it.

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Editor's Note: Eric Kessler is the Managing Director and Joe Weinstein is an Associate Director at Arabella Philanthropic Investment Advisors, a national philanthropy consulting firm that works with individual philanthropists, family foundations, institutional donors and corporations to make their giving more effective.

We just passed President Obama's 100-day mark, and the partisan rancor in Washington, DC is as loud as ever. So maybe it's not surprising that one of Washington's recent bipartisan achievements got so little national attention. On April 22, President Obama signed into law the thoroughly bipartisan Serve America Act, which dramatically expands service opportunities across the country and supports innovation in the social sector.

Central to the Act: the creation of the brand new Office of Social Innovation. This office will provide funding to service organizations and other non-governmental organizations that develop innovative and effective solutions to major social challenges in fields from education to public health. Granted, when compared to economic turmoil, 2 wars and swine flu, social innovation may sound like a low priority. For philanthropists, though, it's a tremendous opportunity.

Getting Innovative

To lead the office, the Obama administration looked to one of the country's great innovators - Google (GOOG). The head of Google.org's international development team, Sonal Shah, was brought in to head the new office.

At a recent conference in DC, Shah spoke directly to the philanthropic sector about the possibilities of working together. "Partnerships matter a lot to us. It's not just that the government does, and everybody else follows," she said. "It really is about where can we learn and what can we do differently." Simply put: The Office of Social Innovation is looking to work with philanthropy. For its part, philanthropy should be looking to support social innovation.

Taking Risks

Why? Because "supporting social innovation" basically means working to improve society by taking some calculated risks, and the ability to take such risks is one of philanthropy's great comparative advantages. Any responsible, publicly-traded company -- concerned about the bottom line and answerable to shareholders -- is bound to be a bit risk-averse. Likewise for governments, which are answerable to the public.

The situation for philanthropy is different. Foundations often answer to just a handful of people, and that creates much more leeway for risk and experimentation; and individual philanthropists can make their own decisions. Donors should embrace this unique aspect of philanthropy and search for innovation to support. This is one of their primary roles in society.

Look, for example, at Bill Gates' current efforts to create a malaria vaccine. Malaria kills perhaps a million people per year, most of them children in developing countries. Gates, the former CEO of Microsoft (MSFT) saw that the public and private sectors weren't taking the necessary risks -- or laying out the necessary cash -- to develop a vaccine, so he decided to try it himself. His bets might pay off in just a few years.

Of course, there are risks when a philanthropist takes this approach. Funding innovation is tricky and subject to a thousand contingencies. But the rewards can be huge. Think about all those children who might not die from malaria.
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