There are many public goods in our life, such as parks and roads. They have two basic characteristics: first, they are non competitive, which means that when one person consumes the goods, it will not reduce the benefits of other people to the goods; The second is non exclusivity, which means that when a person pays for the goods, it cannot exclude other people who do not pay for the goods.
Many items on the blockchain, perhaps most of them at this stage, have the nature of public goods. For example, an application of zero knowledge proof, such as the design of a second-order voting model, can be used non competitively and non exclusively once they are provided.
Although the marginal cost for each additional user of public goods is close to zero after they are put into use, the production of public goods requires costs, and the provision of public goods is a problem. In daily life, this problem is generally solved by the government. However, for a blockchain without a similar organizational structure, how to complete the supply of public goods?
Foundations and Daos that provide foundation functions are the methods we are currently exploring, but how to raise funds for foundations or Daos? How to manage and use these funds? Are these funds provided in the form of donations or investments? There are many things to explore, and we may learn something from the heritage foundation to help us think – after all, it is a successful cause with a hundred years of history and has made great contributions to the development of human society.
This paper is based on zizhongyun’s book “the responsibility of wealth and the evolution of capitalism”, with the help of the book’s research on the rise, development, evolution and role of American foundations, to find some clues for the design and operation of blockchain foundations and Daos.
Zizhongyun, former director of the American Institute of the Chinese Academy of Social Sciences
Mission of the foundation: from church to modern foundation
Few important cultural projects in the United States, large or small, are not directly or indirectly related to the philosophy or influence of the foundation. The foundation has played an inestimable role in the development of the United States in the 20th century. It is an important part of the gradual improvement of the United States.
The Western tradition of helping the weak and the poor mainly comes from the Bible. Since the emergence of the organized church, the church has become the host and intermediary of charity. The donor does not directly donate to the help object, but gives the property to the church, which will distribute it. In this way, philanthropy is not only a personal good, but also a complex property relationship.
In 1601, Britain passed the Elizabeth act, which began the secularization of charities, the socialization of aid recipients, and the establishment of an effective management and supervision mechanism. It can be considered that the regulation is the precursor of modern public welfare undertakings. In the mid-17th century, this new philanthropy spread to the new world with the early colonists. It can be said that the philanthropy in the United States developed synchronously with the development of the colonies.
Franklin is a real pioneer of American public welfare undertakings. The public welfare undertakings he directly founded or helped to establish include: the first public library, volunteer fire brigade, paving roads in Philadelphia, clearing roads, building street lights, police patrols and other municipal construction… He explored a principle of “volunteering” to serve the society and a way to put it into practice that suits American psychology, The cause and activity mode he organized also became the origin of public welfare undertakings.
Benjaminfranklin, American erudite and one of the founding fathers
There have always been two tendencies in public welfare undertakings. One is to “give people fish”, that is, to simply relieve the disaster and the poor; One is to “teach people to fish”, that is, to help people stand on their own. Franklin was the latter. He stressed that the way to do good is not to make the poor feel comfortable in poverty, but to guide them out of poverty. By the end of the civil war, the latter trend was gaining the upper hand, forming the concept of “scientific public welfare”, which was the development foundation of modern foundations.
Among the foundations established during this period, Peabody Education Foundation and Slater foundation are particularly worth mentioning. They have established the model of modern large foundations, which has turned relatively scattered donations into rationalized, organized and professional public welfare undertakings, and built more scientific and rational foundation for exploring the root causes of social problems and assisting vulnerable groups, rather than relying mainly on benevolence and altruism.
With the advent of the 20th century, a number of well-organized modern large funds have emerged, among which the three foundations that play a leading role are sage, Carnegie and Rockefeller. They have hired courageous and good management consultants to plan for the foundation how to use its wealth to benefit the society most effectively. The management mode of the foundation is formal. There is a board of directors elected by itself, and there are administrative departments and principals set up as needed. The board of directors can adjust the work program and donation priorities of the foundation at any time according to changes in circumstances.
These foundations have created so many undertakings that they have become a social force and an independent social department together with other non-profit organizations.
The foundations and Daos on the blockchain are just such modern foundations. Their purpose is not to directly donate money to someone to make their life better, but to provide funds for those who produce public goods, so that the whole “society” has better infrastructure (municipal construction).
Among the three foundations of sage, Carnegie and Rockefeller, the foundation on the blockchain is the most similar to the Sage Foundation with the purpose of “long-term improvement of social conditions”. The latter’s work to achieve its goals mainly includes investigation, research, education, publishing, advocating cooperation and establishing necessary institutions.
How foundations raise funds and fund: the bridge role of community foundations
According to the classification of the foundation Yearbook, there are four major types of foundations: the first type is independent foundations, most of which are funded by individuals or families, and their operation mode is to make donations to projects of various institutions; The second type is the corporate foundation. The difference is that its source of funds is profit-making enterprises. The third type of community foundations and the fourth type of operational foundations are more similar to those on the blockchain, so we will focus on them.
The community foundation is established by the residents of a region to solve the problems in this region, and plays a very important role in American life. Its sources of funds are diverse. It may be founded by local rich individuals with most of their funds, or by many residents. In some places, a large foundation will be the seed, and many small community foundations will be promoted.
The main responsibilities of the foundation are to investigate and discover the needs of the region, act as a bridge between the supply and demand sides of funds, and manage and use funds on behalf of the fund. In the 1970s, the four purposes put forward by Mert foundation became the common work content of Community Foundation:
Establish a system to receive regular and unrestricted contributions.
Respond to emerging and changing community needs.
Provide channels and services for donors with different interests.
Act as a resource provider, broker and catalyst in the community.
We take the Cleveland community foundation as an example to further introduce. The initiator of the foundation is Frederick gove (himself known as the father of the community foundation). He studied law and used to be the legal adviser of old Rockefeller. He also has a lot of research on Saiqi and other foundations. After absorbing the experience of many large foundations, he initiated the institutional model of Community Foundation.
Goff put forward two specific goals at the beginning: first, there should be regular donations in fund-raising, rather than annual fund-raising activities; Second, a representative organization should be established to be responsible for spending money. Next, the foundation established a distribution committee consisting of five members, two of whom were elected by the Cleveland trust company, and the other three were elected by the mayor of Cleveland, the senior judge of the district court and the probate judge at the location of the foundation.
After completing the legal and organizational procedures, Goff immediately began to carry out a series of large-scale investigations involving public schools, entertainment, criminal justice, etc. He hired high-level experts to do this work. The purpose of the investigation is to make the public understand the current situation and trigger their demands to change some of the current situation. Through this investigation, the community foundation has attracted donors and established prestige in the whole community, that is, to make both sides believe that the community foundation can improve the conditions of the community.
The objects and work contents supported by the foundation include:
Encourage research on community social problems and propose solutions.
Set priorities for action on these programmes.
Funding research, exploration, experimentation and other projects to address these issues.
Provide professional staff to credit cooperatives and foundations that lack professional support and operate under difficult conditions.
In order to avoid investing money into the bottomless pit and avoid the dependence of donation objects, the foundation has adopted the following practices:
We will provide seed funds to some groups, and then assist them in long-term planning and management in various ways.
Entrepreneurs are invited to act as the Advisory Group of the team to teach their principals the way of management. At the same time, entrepreneurs can understand the team work, realize their importance to the region, and contribute generously to it.
To promote “challenge donation”, the relevant teams promised to raise the corresponding funds in a certain proportion when applying for funding.
A successful example of this series of initiatives is that the Cleveland foundation has raised development funds and site construction funds for local art groups, which has greatly promoted the development of local art and made Cleveland brilliant in art.
The Cleveland foundation contributed to the completion of the Cleveland theater Square Center
American community foundations have a considerable impact on the development of local economy, society and culture. In the eyes of some people, community foundations are equivalent to civil legislative bodies, which can determine the priorities and schedules of their communities and play a role that local governments cannot play.
Whether the Ethereum foundation, Moloch Dao or gitcoin grants, their goals are similar to those of the community foundation. They are all aimed at improving community conditions and providing funding for programs or projects to solve community problems. In terms of the source of funds, they all rely on the community or community members themselves rather than a private philanthropist.
We may be able to apply some successful organization methods and working methods of community foundations to the construction of blockchain foundations or the design of Dao models. In fact, gitcoin grants’ donation allocation and the challenge donation of the community foundation have much in common. In addition, is it feasible for an official community foundation to obtain funds for the production of public goods (just like a government agency) by drawing taxes? Zcash’s miners’ tax seems to be an attempt on this path.
Operational foundations are the fourth type of foundations. Most of the funds come from a single private or family. The difference is that they mainly do their own projects rather than donate to others. They are somewhat like non-profit research institutions.
The representative of such foundations is the Charles Kettering Foundation founded by Kettering. Kettering is an inventor who goes down in history. His invention seems ordinary, but it can solve key problems and greatly promote productivity. His inventions include: auto starter, freon application, safety glass, the earliest aircraft integrated fuel… Kettering not only has his own talent for invention, but also believes that new ideas can be generated through collective cooperation.
Caitlin foundation was fully focused on scientific research in the early stage. It was composed of several laboratories. Each laboratory proposed work plans and budgets to Caitlin every year, and Caitlin allocated them from his own assets after recognition. The Charter and mode of operation of the Charles Kettering foundation were closer to the Institute, and he was the sole leader until his death.
The “official” foundation on the blockchain seems to have the shadow of an operational foundation in the early days. For example, Ethereum foundation changed the resource allocation method from the previous “wage system” to the “project system”. When blockchain projects, especially large community-based projects, are “official” operational foundations more efficient?
In addition, can there be a combination of community foundations and operational foundations? In other words, it depends on the community rather than the individual to raise funds, and it operates its own projects rather than funding others in the use of funds? It seems that this new form of foundation needs to win more trust from the community, not only in the use of funds, but also in the ability to implement projects.
Donation in the form of investment: a new trend of venture capital public welfare
In the past ten years, a new type of public welfare undertakings has risen rapidly and developed into a strong international trend. To sum up, this is a public welfare model with the goal of pursuing influence and efficiency, mixed for-profit and non-profit. Its core content is to do public welfare in the market mode, so that public welfare is not only a free donation, but also a profitable cause.
This public welfare model may be instructive for the design of Dao on the blockchain.
The new public welfare model has the following three characteristics:
It is no longer limited to non-profit, but can also be expanded through profit-making undertakings. Pure free donations will always dry up, but the reality is that there are huge assets waiting to be developed among the government, private enterprises and non-profit sectors. The new public welfare combines supply and demand, capital market and government rules, so that private enterprises and public welfare are no longer the opposite sides. On the one hand, the bottom line to measure success or failure is not profit but social value; On the other hand, those who successfully solve social problems are not the victims of pure altruism, but will get their due rewards.
Take the initiative to investigate the needs of the society and have a definite aim. The new public welfare will find appropriate organizations to provide subsidies according to social needs and operate in a market mode. These organizations include not only non-profit non-governmental organizations, but also profitable social enterprises.
Cooperate with multiple parties to form a comprehensive system engineering and pay attention to the results. The cooperative participants of the new public welfare include the initiator (or the original investor), the investor, experts and research units, the media and the community, and they form a contact network. The investors regard the project as investment and give it to the willing and capable objects to implement.
The coverage of the new public welfare is relatively broad, and its spectrum is completely aimed at social services, regardless of economic benefits; To give consideration to both; To take profit as the main goal and give consideration to social benefits. Generally speaking, new public welfare can be divided into the following three categories:
Venture capital commonweal
Venture capital commonweal, also known as venture capital commonweal, contains several decisive elements: accurate financial design, high responsibility, continuous tracking of investment objects for many years, helping their organization and capacity building, and performance evaluation. The reason why these elements can make venture capital public welfare different from the traditional public welfare donation is that the latter generally only cares about the projects of the funded objects, and does not care about their ability to complete the projects.
In addition, traditional donations often cover only part of the short-term funds required for the project. As a result, the funded party has to spend a lot of time and energy on annual fund-raising rather than on Governance and business. This situation may also lead to the loss of talents. However, VC commonweal absorbs the advantages of venture capital and can avoid these disadvantages.
Another difference of venture capital commonweal is that it has an exit mechanism. After a period of time, the initial investor can withdraw if the funded person achieves the expected effect or finds a replacement sponsor.
The operation mode of social enterprises is no different from that of general enterprises, but profit is not its ultimate goal. It must engage in undertakings beneficial to the society. The source of funds is partly donations and partly operating profits. The goal is to gradually achieve their own hematopoiesis. The advantage of social enterprise lies in that compared with endowment fund, it is sustainable and can be popularized; Compared with ordinary enterprises, it receives less pressure from shareholders to pay attention to profits. Measuring the quality of a social enterprise puts social benefits first.
The term “impact investment” comes from a conference convened by Rockefeller Foundation at the Bellagio center in 2007. The theme of the conference is: where can capital be invested to most effectively benefit society and the environment. In the spectrum of new public welfare, influence investment is closer to the end of emphasizing market benefits. It has more distinct commercial profitability and emphasizes the pursuit of scale effect.
Influence investment is between traditional investment and traditional charity. Source: Rockefeller charity consulting agency
Influence investment introduces a large amount of private capital into the poorest people, which can not only fill the gap where services are completely absent, but also eliminate monopoly suppliers with inferior quality and high price through market competition. Its beneficiaries are not only passive recipients, but also investors.
In a sense, venture capital public welfare, social enterprises and influence investment can also be classified as venture capital public welfare. The former is the theme, while the latter two and other forms of new public welfare are variations.
Some operation modes of venture capital public welfare
Gates Foundation, Rockefeller Foundation, J.P. Morgan and Citibank are all leaders of new public welfare undertakings. In this part of the article, we will introduce some representative new public welfare organizations to see their operation modes that are worth learning from.
DRK’s selection criteria for the project include three points: the ability of the founder, the scalability of the project model, and the potential world influence of the organization. Once the funding target is confirmed, there is no limit on the amount and duration of funds. The foundation will send people to join the leading organization of the project as an entrepreneurial partner to deeply involve in its organizational construction and large-scale work.
Ashoka social innovator
Ashoka social innovators have developed a selection mechanism: first, a group of shortlisted candidates are selected from the national social entrepreneur database through background investigation; Then the headquarters will send people to the residential area of the finalists for a carpet visit. The interviewees include any possible stakeholders around the candidates; Finally, the candidate was “tortured” again by the advisory panel. Asoka has a 17 member decision-making group, which adopts a one vote veto system in the selection of funding objects.
Ashoka social innovator
Social Venture Capital Partners
Social Venture Capital Partners (SVP) are joint venture capital commonweal, and fortune magazine calls them the pioneer of venture capital commonweal. In order to find competent public welfare supporters and make them play a role, SVP has explored a path: cultivate citizen philanthropists through self-learning, self-education and democratic autonomy, make them volunteer to establish partnership with public welfare organizations, and use their own professional skills to deeply participate in and help improve the capacity of these public welfare organizations. This mode of public welfare people’s Association is very efficient through division of labor and cooperation.
The influence workshop (hub) model originated in the UK. Jonathanrobinson is the initiator of the first hub. He envisions opening up a venue where social entrepreneurs who intend to combine doing business with doing good deeds can discuss, inspire and cooperate with like-minded people, and establish a network that can obtain capital and other people’s experience.
Hub pays more attention to cooperation than transaction. It combines the spirit of social movement, the logic of business and the cooperative ownership of social networks, creates a decentralized institution, and promotes the maximization of the organizational capacity of member institutions. Each hub is not only responsible for the center, but also for all hubs.
Bill and melindagates Foundation
In 2012, Bill Gates put forward the concept of “catalytic philanthropy” at the dinner party of Forbes 400 rich philanthropy summit in the United States. In his speech, he said: the business sector has been very successful in meeting the demand with the ability to pay, but it often ignores those areas with low risk return rate, which are full of huge innovation opportunities. Catalytic philanthropy is similar to high-risk investment in the private market. The benefits of investment will benefit the poor, patients and even the whole society.
In catalytic philanthropy, donation or investment acts as a catalyst like an enzyme in a chemical reaction.
In 2012, bill and melindagates attended the Forbes 400 billionaire philanthropy summit in the United States
The new public welfare of the United States, which combines for-profit and non-profit, aims to lead capital to the cause beneficial to the society from the beginning. It does not necessarily represent altruism, but a vision of sizing up the situation. It gestates a way of capital conscious innovation.
Although public goods are generally provided by the government, some economists, including Zhang Wuchang, believe that public goods can also be provided by private individuals and charge consumers. In fact, this method can be combined with venture capital public welfare, providing profitable public goods in the form of a profit-making foundation.
For the blockchain community, which has no government organizations and whose members are mostly entrepreneurs or investors, this seems to be a particularly suitable path: it not only conforms to the wishes of investors, but also enables entrepreneurs to achieve sustainable and results oriented research and production of public goods and infrastructure. Among the ways of relying on tax collection, community awareness, personal charity and investment, venture capital public welfare relying on investment may be the most worthy to be learned by blockchain foundation or Dao.
Foundations can do more
In a speech, Obama elaborated on the idea of division of labor and cooperation between the government and the people. He believes that if the US government is expected to solve all problems, it will be disappointed. Because in the end, the best solution is not to come from Washington from the top down, but from everyone in the community from the bottom up. Obama applied to Congress for $50million as seed money for the social innovation fund to accomplish a series of things that are difficult for the government.
The work of the social innovation fund is to collect data, conduct strict assessment, find the most promising non-profit organizations in the United States to invest, and use them to obtain the best return for taxpayers. In terms of operation mode, it will require the funded non-profit organizations to raise matching funds from other investment resources. From a certain point of view, social innovation fund is similar to venture capital public welfare, but its source of funds is every taxpayer, and the return on investment is also given to every taxpayer.
The government serves the society in the form of a foundation, which proves the energy contained in the foundation. This may bring more confidence to the blockchain: the provision of public goods on the blockchain is a major problem related to the future of the community that has not yet been well solved. However, if the foundation and Dao keep exploring, iterating and developing, they may eventually be able to solve this problem, because at least in the real society, The foundation approach proved to be effective.
For every “resident” in the community, it is one aspect to participate in the foundation or Dao through donation or investment. Paying attention to them and urging them may be another more important aspect.
Responsible editor; zl