Changing the way we think about charity

I recently watched a Tedtalk by Dan Pallotta entitled "The way we think about charity is wrong", which can be found by clicking http://www.youtube.com/watch?v=bfAzi6D5FpM. I was consulted to watch this video by a friend and found this to be the best youtube video I have ever seen. In this video, Dan Pallotta breaks down the problems associated with the non profit sector and why it has steadily been 2% of GDP since 1970, when this statistic was first measured. Dan Pallotta breaks down 5 key reasons for why this industry is suffering, especially compared to the private sector which has grown immensely during this period:

1. Compensation - In the non profit center, making money is considered a bad thing, especially when compared to the private sector. Dan Pallotta makes a point that "how can the non profit sector grow and do well when people can't make money in this sector". He goes on to challenge the taboo behind making money in private sector. Why is it such a terrible thing to create social impact and create money in the private sector? I completely agree with this argument. If you want your charity to have the best and brightest people to create change in the world, you should compensate them well to attract the best talent. Dan Pallotta cites a Businessweek survey that tracks the median income of a Stanford MBA 10 years out of college, which is 400k. The average CEO of a Hunger Charity is 80k. Seeing this change, it becomes very clear why Stanford MBA's are not joining Hunger Charities. This creates a world where people in non profits have to live frugal lives. We can clearly see why non profits are struggling, when compared to the private sector. I truly believe that if non profits compensate their employees better, they will be able to fundraise more money since they will have brighter minds leading their company. 
2. Advertising and Marketing - In todays non profits, spending money on advertising and marketing is considered a terrible thing. People expect that non profits not waste valuable dollars on advertising and marketing when they can get that donated. However, in business we know how valuable advertising and marketing is. You should always advertise and market your company/product when you can gain some return that is greater then your cost. This is how companies grow. However, when people donate money, they do not want to hear that their donation went towards marketing and advertising. I think if we want charities to grow and prosper, advertising and marketing is necessary. It is marketing and advertising that will allow non profits to really grow and make people aware of their cause so that they can get more donation dollars. If non profits can't show the good they are doing and use that good to attract more dollars, then how can we expect people to give them more money.
3. Taking Risk on new revenue ideas - In the private sector, taking calculated risks is strongly encouraged. It is taking these risks that allows employees to try out new things and find true innovation. If you think about any company that really thrived, they did so through risks. It takes risk to issue a new product or to try and change the way people think about certain products. However, in non profits, taking risks are not encouraged at all. If a non profit takes a risk and looses a million dollars in trying something new, that company is crucified and held accountable by the attorney general. However, it is these risks that could allow non profits to find new innovation and grow. 
4. Time - Private companies can take time in not returning money to investors because investors know that they will get paid at the end of the timeline. However, non profits are not allowed to take money and try to build scale so that they can do extremely well competing in the long run. They have to take the money and donate it right away, which does not allow them to build a framework for the long run.
5. Profit to attract risk capital - The for profit sector has a multi trillion dollar market to pull money from, but since the non profit sector can't have any profit, they have no access to this money. I think this needs to change, because it can be an opportunity to non profits to have access to much more money.

After listening to this whole talk, it becomes clear to me that we need to change the conversation around non profits and the private sector. Non profits should not be held to a standard of almost sainthood and the private sector should not be treated as corporate sell outs. If we brought them on the same page i.e. non profits are treated as a business and allowed to make money, then we can allow them to grow and spend money on infrastructure so that non profits can gain more fundraising and ultimately create more social impact.