Scaled Non-Profits Mostly Stink

Even When They Have Worthy Mission Statements

If you see the word “non-profit” associated with something, your internal radar should be beeping.

When my kids were attending a tony private school in downtown Chicago a lot of the faculty there and even some parents were shepherding their kids into the non-profit sector. You’d meet people that were “distinguished and respected” and worked for a non-profit trying to solve some problem that “capitalism couldn’t solve”.

It never occurred to them that it might be a problem that wasn’t worth solving or was created by bad government policy so structurally, it couldn’t be solved.

It had never occurred to me that you could pursue a career in non-profits and actually make a good living working there.

I’d go to panels at distinguished and respected civic institutions and be introduced to someone on the panel who worked for a non-profit. They’d lecture us capitalistic businesspeople on how to solve the world’s problems.

That’s why this article struck a deep chord in me.

I’d talk to some of these parents and tell them, “Your kids have everything. They have trust funds that come from money. They ought to be the ones out there taking big swings and trying to create a business because if they fail, at least they have a big safety net.”

The parents, 100% who voted Democrat, would look at me blankly.

The non-profit industrial complex is destroying America. We ought to figure out ways to ban it. “Capitalism” is a dirty word in my little summer place of Grand Marais, MN. There is a non-profit up there that owns some of the most prime real estate on the shoreline of Lake Superior. When the fake and engineered Covid crisis swept the nation, one small business in town went under. In a prime location a non-profit filled the space.

Imagine the scale in a place like New York City or Los Angeles.

Somehow it has been civically derived that if someone isn’t making money at something like a capitalistic enterprise, it’s somehow “good”. That is normative economics at work. Non-profits often are terribly evil.

The non-profit world is why we have Ayn Rand and George Orwell doublespeak in almost anything which comes out of government or non-profits. I pulled this quote from the article.

A lie that makes money will always be preferable to a truth that does not. Once you realize that every name is propaganda, it becomes readily apparent how much misconduct, greed, and corruption can be concealed behind an innocuously disingenuous name, especially a name that successfully evokes positive emotions in the general public.

You can envision them in what used to be the cigar-filled backroom now. Dressed in Armani and Zegna around a table at their downtown club, Hispanic servants who speak very little English filling their non-alcoholic drinks and bussing the picked-at salads. No ties of course and if you are female, something very nice but not too sexy. The leader says, “Well, we could have Blaine at Commerce do this, but why shouldn’t Tripp here find someone to lead a non-profit. Abigail can set up a 401(c)(3) via the interns at her law practice. GDWB has a pro bono arm no? You know, I went to Brown with Blaine. Tripp, find a person. You know the type. If it’s a white male, at least make him gay or something. We could all donate some money to get it going then hire Muffy’s lobbying firm to get some money. Chip at Ways and Means will earmark it for us.”

Non-profits usually have a person with great credentials leading it. Often they come from a highly respected school. They might come from a leading family in the city that they lead the non-profit. That person might earn what seems like a pittance to them, say $250,000 a year running the non-profit but because of their connections they are able to make a lot more than that. The non-profit might get them board work in the corporate world or a paid consultancy somewhere else.

One thing we learned in the capitalistic part of the world is that if we make more money solving a problem, we try to do more of it. We try to scale and extend our business. Non-profits do the same.

Often, they use the dollars they mine out of the government coffers to lobby the government, and that lobbying exacerbates the problem they are dedicated to solving. I pulled this quote from the article.

This money is then spent in ways that would shock the taxpayers whose hard-earned dollars are being effectively stolen from them. Non­profits that self-righteously declare themselves providers of homeless services actively lobby to make homelessness worse in order to increase their own funding; nonprofit organizations hire convicted felons—including murderers, gang leaders, sex offenders, and rapists—who go on to commit more felonies while receiving hundreds of thousands of dollars in government contracts; and the executives of nonprofits, the very people in charge of institutions whose stated purpose is not to make money, earn millions of dollars while catastrophically failing to deliver the public services we are paying them to provide.

These aren’t non-profits like a museum. They are dedicated to solving unsolvable problems like food deserts, homelessness, or gun violence. They use big-sounding multiple-syllable words that people might have to look up in a dictionary in their mission statements and the audience claps, like circus seals.

I have been on the board of a museum. Museums don’t scale. They are not only driven by the mission behind the museum, but because they are a physical structure a part of their mission is the physical place. The New York Museum of Modern Art might be about furthering the appreciation and consumption of modern art. But it also has a very special NYC culture piece embedded inside of it. Done well, museums are wonderful places where we not only learn about what we are experiencing and learning about ourselves.

The non-profits that scale take on “current thing” type problems that never seem to go away.

This isn’t just a few hundred thousand here, a few hundred thousand there, in taxpayer dollars. It’s into the billions when we look at it nationally.

All tax-free.

Is there a difference between the Tides Foundation and Exxon($XON)?

What disgusts me is that I have witnessed the development of the whole non-profit thing in the entrepreneurial world. People received taxpayer dollars to set up “accelerators” that helped some perceived underserved part of the population. It wasn’t only based on skin color or gender or sexual orientation. Maybe it was veterans or something like that.

The people that run these things generally have exactly zero experience in entrepreneurship. They are exceptional at selling themselves to the right politician to get money to line their pockets. Businesses funnel money to them to look good. It’s always nice to go to a board meeting and tell the board you are trying to help an affected victim class by supporting entrepreneurship.

Most if not all of the non-profits that are scaled also function to increase the size and scope of government. Because they exist, government spending goes up and the size of the bureaucracy goes up.

The problems are so bad that I invested in a company called Streamlink Software that manages the grant process. I also invested in Public Good for the same reason. If you can’t beat them, you might as well make money off of it. For what it’s worth, both companies are in business. Their businesses are growing. But, they aren’t “blowout” businesses. Hopefully somebody will buy them someday and I will get a return.

That’s not how the non-profit world thinks. They aren’t looking for return. They are only looking for more tax dollars to increase their budget.

The scalable non-profit industry is merely another inefficient way to redistribute taxpayer dollars to people with strong enough government connections to get them.

Quoting from this brilliant article again,

The cities progressives control therefore tend to underfund core government agencies in favor of “community-based organizations,” by which they mean NGOs and nonprofits. Once the government can no longer meet its responsibilities, progressive cities outsource those ser­vices to nonprofit organizations, effectively privatizing the government.

So, what’s the answer to my question above about the difference between the Tides Organization and Exxon?

One is accountable. The other is unaccountable to anyone. One has to create value, solve a problem for customers, and figure out a way to charge a high enough price to cover expenses and earn enough profit to return some sort of value to shareholders. The other does not. One pays taxes. The other does not.