It’s hard to fundraise. Why?
Because in our heart of hearts, we don’t believe most people will help simply because others need help. We believe most people do things that benefit them personally. We believe the only people who will support our mission must be impacted by our mission. They must have cancer touch their own family to care about cancer. This is transactionalism.
We have been fed this idea by academia as truth. Our marination in this idea makes it hard for us to fundraise, to think beyond the apparent transaction at hand with a potential donor. Intellectually, we know transactionalism is unproductive in fundraising (we can see the data), but we still do it.
How did our belief in quid pro quo become so pervasive and unquestioned? Why is transactionalism the water in which we swim? Why do I still get multiple emails a day “selling” social good in one way or another? I blame one guy: Adam Smith.
I Went Through Hell for You
I have been listening to the lectures of Milton Friedman, the person who advanced the idea of neoliberalism in the 1970s and 1980s, and received the 1976 Nobel Memorial Prize in Economic Sciences. It was not fun, but it was illuminating. In those lectures, Friedman fleshed out his ideas on how life works.
While “neoliberalism” sounds like an advanced form of granola-sided politics, it is actually a take on the traditional use of the word “liberal” regarding politics and economics generally. For those who aren’t political junkies, word use in this area is tricky. For our purposes here, don’t assume “liberal” has much to do with the Democratic Party or its policies.
“Liberalism” in this article describes economic political liberalism. It means, “Don’t mess with the markets.” In this sense, liberalism supports low government market intervention and high levels of free trade.
Now that we’ve dissociated “liberalism” from the Democratic party, we can have a conversation.
What Is Neoliberalism?
Neoliberalism is a resurgence and reinterpretation of political and economic liberalism that started as early as the 1930s. Scholars like Friedman formed this narrative.
Neoliberals believe this is how life works:
- Everything is a competition.
- Humans are perfectly rational decision-makers.
- Humans act primarily in self-interest.
Adam Smith’s Hidden Hand of Self Interest
Before Friedman, people like Adam Smith (whom most call the first great economist) put forth theories about how things worked that included the neoliberal tenets above. He applied them primarily to industry, devising systems that offered (primarily) financial reward for, well, everything. His presumption, entirely accepted by society, was that men would do what would benefit them personally. Smith described this as the “hidden hand” driving all human industry. The “hidden hand” was self-interest.
How did Smith’s ideas become installed as fact? Smith had no data of which to speak. He possessed a brilliant intellect but had no fodder except what he could see in front of him. He was without the opportunity to conceptualize entire systems via the vast amounts of data we have now. But, he was persuasive — as evidenced by Friedman occasionally teaching class wearing an “Adam Smith” tie.
Unlike physics and biology, economics is not hard science. Economics creates stories to explain data. Economics is a narrative. Ten different economists could interpret one data set in 10 different ways with 10 different narratives. There is no great truth in this pseudoscience.
However, Smith’s ideas were promoted by scholars like Friedman not as one possible narrative, but as the answer: “This is how life works.” That unquestionable certainty lands quite differently on the ears of an Econ 101 student than “this is one possible answer.” As a result, classical economics’ theory of behavior has influenced how most people today think about others’ behavior in our society.
Thanks to Friedman and others, several generations of college-educated professionals have entered the workforce with neoliberal ideas installed as fact instead of theory. And that is unfortunate because…
Adam Smith Was Wrong
The consequences of his overwhelming wrongness may outweigh the intellectual capital that Smith delivered. We can forgive Smith for where he landed philosophically, because he lacked access to the kind of data and understanding of social science that we have now, not to imply we know all there is to learn by a long shot.
What Smith and others missed is that while the “hidden hand” they identified does exist, it is most often subordinate to another “hidden hand.” That other, more powerful, hidden hand is one of community. That other community-minded hidden hand defines self interest differently, more broadly, and includes the care of other people.
The desire to be part of and support a community is greater than the hidden hand of self interest.
Enter Behavioral Economics
The field of “behavioral economics” was created because Smith’s thesis that people act only in their self interest didn’t hold up under scrutiny. Behavioral economics integrates psychology, neuroscience and microeconomic theory to explain why peoples’ behavior often varies from that predicted by classical economic theory.
Beginning in the late 1960s, researchers Daniel Kahneman and Amos Tversky published more than 200 studies relating psychological concepts to behavior about financial decisions.
Their work, and that of behavioral economists who followed them, profoundly transformed our beliefs about what motivates people to make many of their choices. Behavioral researchers have been awarded six Nobel Prizes since 1895 when the awards began. Of the six, three have gone to behavioral economists since 2002.
In 2002, Daniel Kahneman was awarded the Nobel Prize in Economic Sciences “for having integrated insights from psychological research into economic science, especially concerning human judgment and decision-making under uncertainty.” Note that Kahneman is a psychologist, not an economist.
In 2013, economist Robert J. Shiller received the Nobel Prize in Economic Sciences “for his empirical analysis of asset prices.” And in 2017, economist Richard Thaler was awarded the Nobel Prize in Economic Sciences for “his contributions to behavioral economics and his pioneering work in establishing that people are predictably irrational in ways that defy economic theory.”
This body of work has a common thread. Classical economic theory assumes that individuals act unselfishly only when they stand to benefit in some way. Many studies have shown that people underestimate how willing others are to help them out in times of need. These studies have demonstrated that most people are pro-social, often sacrificing their own success to benefit others. In other words, they are “altruists.” No longer are people assumed to be purely selfish.
The Few, the Proud, the Narcissist
Many political insiders have observed that Donald Trump’s interactions (on many levels) are highly transactional. For example, he reportedly characterized Americans who died in war as “losers” and “suckers” instead of heroes and patriots.
Framing soldiers’ behavior in neoliberal terms, Trump would be right. But how else does one explain the behavior of those who willingly go to war, putting themselves in harm’s way for little recompense, other than they are responding to the hidden hand of community?
Barring Trump, our society articulates and venerates the hand of community in this instance while ignoring it in so many others.
We Built Our Systems for Narcissists
For the last 50 years, we have built many of our society’s rules to allow narcissists to flourish. The acceptance of neoliberal theory has diminished the shame previously attached to behaving in a manner that serves oneself first and foremost. Most of today’s workforce has a mindset framed by Smith and Friedman.
We reward the narcissist who reflects our ideas about the transactional nature of all things with leadership and promotion. As a case in point, take our president from 2016 to 2020.
Happily, there is a recent movement to redefine “shareholder” in the corporate environment to include all shareholders. The redefined shareholder includes users of a product or service, community members impacted by the manufacture and delivery of that product and service, the consumer and the actual holder of shares. The previous definition included only those who held shares.
Our society is beginning to hold CEOs to the standard of increasing shareholder value for all shareholders, not just owners.
The Answer to Why We Transactionalize Everything
The intersection between these ideas and social good is that several generations of us have been taught that Smith’s hidden hand is the controlling force behind behavior. It drives the way we approach our work for social good. It’s why we lean into reflexively making what amount to “offers” to our constituents.
To avoid “making a deal” is counter to what academia and our culture taught us. We (Turnkey) teach a class explaining why (psychologically) transactionalism is against human nature and undercuts successful fundraising. The first question in the Q&A is often straight from “Let’s Make A Deal”: “So… do you think I should put in a registration fee to ensure that I make at least a little bit of money?” Automatic, deeply-ingrained, unseen, unsmelled transactionalism at work.
It will take time for us all to catch up on what behavioral economics has taught us. Its findings are counter to the “rugged individual” ethos that runs through American culture. These ideas spark fears of a “commie takeover,” to which they are in no way connected.
It took me (Katrina) until I was 35 to fully understand why the hell people wanted a stupid plaque. I kept seeing that they did want one, but getting to “why” would take me a lot longer and would lead to a lifetime of study for me.
Using the language of self-interest to read the book of humanity leads us to do things that undercut our success and hurt social good. It’s time to name the beast and put it to rest. It’s time to be brave enough to believe in the hard science, that will lead us to say soft things like, “We love you. Come be with us.”
Katrina VanHuss and Otis Fulton have written a book, Dollar Dash, on the psychology of peer-to-peer fundraising. Click here to download the first chapter, courtesy of NonProfit PRO!
Originally Published by www.nonprofitpro.com