02/09/2009 05:12 am ET Updated May 25, 2011

Guest Post: Sean Stannard-Stockton

[Sean Stannard-Stockton and I began an off-line exchange about strategic philanthropy, and we agreed that it would be useful to continue it online and get your views. Here's a guest post by Sean. My reply will follow tomorrow, and we look forward to your posts as well.--Paul]

"What's The Evidence For Evidence-based Theories of Change?"

By Sean Stannard-Stockton

In Paul's book Money Well Spent and on this blog he has advanced a theory of strategic philanthropy that includes eight points:

1. A problem-solving orientation;
2. Clear goals;
3. A logical strategy for how one's efforts can help achieve those goals, based on
4. A sound analysis of the problem and an evidence-based theory of change;
5. Good information about individuals and entities that can address the problem (i.e. thorough due diligence);
6. Sufficient resources, whether individual or aggregated, applied to achieving the goal, over a sufficient period of time;
7. Commitment to measuring progress and results and to making changes accordingly; and
8. An "expected-return attitude" that takes appropriate account of risk.

Recently I've been discussing this framework with Paul and after a few back and forth emails he suggested that we continue the discussion on our respective blogs. Unlike most of the writing I do, where I advance a specific opinion, this series of posts will be a live discussion in which I have not made up my mind but am skeptical of part of Paul's framework. This is me going through the process of forming an opinion in public. I hope you'll join in the fray.

I agree with almost all of Paul's eight points, although I would suggest that they are a framework for good philanthropy and not unique to a "strategic philanthropist." The one point that I think defines the current practice of Strategic Philanthropy is the second half of point #4, "[Having] an evidence-based theory of change." I believe that this point, the defining element of the way strategic philanthropy is practiced, is deeply flawed.

The theory of change concept makes sense in a static landscape where you can learn more and more about what works and what doesn't and finally craft the perfect theory. But I think it fails in a dynamic landscape, such as social change, where what you learned on your last trip might not apply this time. And even if it does apply, there might be new forces at work that make the lessons you learned last time immaterial.

I think that social change is an area where any theory you have will prove to be wrong at a high enough rate that you are better off investing in a portfolio of organizations who can navigate the course as they go. Imagine you are setting out to cross a wilderness that is in a constant state of change. You could create a theory of what it looks like and how to cross it and then send out a party that is specifically geared to follow the path you expect to work. Or you could build a series of parties that are built to face whatever comes their way and then send them out with instructions to make decisions in route as to the best path to take.

In proposing this argument, I'm drawing very heavily on thinking in financial markets of the value of big picture, "macro calls" on the market vs. stock picking. A theory of change or "macro call" in financial markets might be: "The economy will rebound in the second half of 2009, largely spurred by Obama's infrastructure-heavy stimulus package. Therefore, investors should buy infrastructure companies, but avoid financial companies." Unfortunately, history has shown that attempting to make these kinds of predictions is next to impossible. Instead, almost all great investors focus most of their time on identifying great organizations or "under recognized" organizations.

This was my point when I quoted Warren Buffett during the Tactical Philanthropy Forum that I held with Paul saying, "If I spend 15 minutes a year thinking about the economy, I've wasted 14 minutes." If the economy and markets were static systems, then we could just predict the economy and jump in and out of various sectors of the market as our theory informed us. But since both the economy and financial markets are human-based endeavors, they are dynamic systems and resist our hope to master them. On these rocky seas, our best hope is to build sea faring vessels with great crews, not predict the weather.

The "theory of change" concept draws on the practices of scientific discovery. Social systems, however, are relatively resistant to scientific analysis. As philanthropy attempts to affect dynamic, human-influenced systems, I wonder if we might need to give up the search for the perfect theory of change and instead embrace what might be called Capital Market Philanthropy by focusing our philanthropic efforts on building great organizations.