This first aired in 2018, yet it feels more relevant right now, as we witness gross acts of separation and exploitation of non-white people, and the wealth divide has become larger and more consequential. Edgar Villanueva’s book, “Decolonizing Wealth,” takes an innovative look at the purpose of wealth. His thesis is that the solutions to the damage and trauma caused by American capitalism, including philanthropy—can be gleaned from the values and wisdom of our nation’s original people. Edgar is a Native American working in philanthropy. (Originally aired 11/30/18)
We’re the #1 Podcast for Nonprofits, With 13,000+ Weekly Listeners
Board relations. Fundraising. Volunteer management. Prospect research. Legal compliance. Accounting. Finance. Investments. Donor relations. Public relations. Marketing. Technology. Social media.
Every nonprofit struggles with these issues. Big nonprofits hire experts. The other 95% listen to Tony Martignetti Nonprofit Radio. Trusted experts and leading thinkers join me each week to tackle the tough issues. If you have big dreams but a small budget, you have a home at Tony Martignetti Nonprofit Radio. View Full Transcript
Welcome to Tony Martignetti Nonprofit Radio. Big nonprofit ideas for the other 95%. I’m your aptly named host and the pod father of your favorite hebdominal podcast. Oh, I’m glad you’re with us. I’d suffered the effects of hypergargolasthesia. If you tickled me with the idea that you missed this week’s show. Here’s our associate producer, Kate, with what’s going on. Hey Tony, here’s what’s going on. Decolonizing wealth. This first aired in 2018, yet it feels more relevant right now as we witness gross acts of separation and exploitation of non-white people, and the wealth divide has become larger and more consequential. Edgar Villanueva’s book, Decolonizing Wealth, takes an innovative look at the purpose of wealth. His thesis is that the solutions to the damage and trauma caused by American capitalism, including philanthropy, can be gleaned from the values and wisdom of our nation’s original people. Edgar is a Native American working in philanthropy. This originally aired November 30th, 2018. On Tony’s take 2. I hope you enjoy your holidays. Here is decolonizing wealth. It’s my great pleasure to welcome to the studio Edgar Villanueva. He’s a nationally recognized expert on social justice philanthropy. He chairs the board of Native Americans in philanthropy and is a board member of the Andrus Family Fund working to improve outcomes for vulnerable youth. He’s an instructor with the grantmaking school at Grand Valley State University and serves as vice president of programs and advocacy at the Schott Foundation for Public Education. He’s held leadership roles at Kate B. Reynolds Charitable Trust in North Carolina and Marguerite Casey Foundation in Seattle. Edgar is an enrolled member of the Lumbee tribe of North Carolina. You’ll find him at decolonizingwealth.com and at Villa Nueva Edgar. Edgar, welcome to the studio. Thank you, Tony. Pleasure to be here. Congratulations on the book, you, which just came out, uh, what, last month. It was October, October 16th. Yes, alright. And, uh, you just had a very nice interview with The New York Times. Yes, congratulations on that. They, that’s prep, preps, preps you for nonprofit radio, right, right. I’m ready. All your, all your media appearances to date have brought you to this moment. So that, that it’s all culminated here, um. And I promised listeners, uh, footnote one, footnote one to, hypergaralesthesia, uh, of course anybody who listens to the show knows that, uh, I opened with, uh, something funny like that, a disease every single show, uh, but in Edgar’s book he, uh, mentions hypergargalesthesia. So this is the first time over 400 shows that the, uh. That the guest unknowingly has uh provided the opening disease state. So thank you very much. You didn’t know but we do that every single show um that you didn’t know that you’re not listening to nonprofit radio it’s it’s your life alright um. OK, uh, decolonizing wealth, uh, you’re, you’re, you’re, you’re a bit of a troublemaker, a little bit, yeah, you’re raising some eyebrows. Uh, someone told me, uh, yesterday that I was the Colin Kaepernick of, uh, philanthropy, which, um, I was like, I haven’t thought about it that way, but alright, that’s not all bad. Get a little closer to the mic so people can hear you, yeah, just get not almost intimate with it, almost, um, I used to call myself the Charlie Rose of charities. Until he blew that gig for me, you know, he, he ruined that, uh, it’s, it’s, I can’t use that any longer, um, could you talk about, uh, colonizer virus and exploitation and division, um. Uh, like these are bad things, yes, they are bad things. OK, what, uh, what is the, what, what, what’s the colonizer virus? Why do we need to decolonize? So many of us who, uh, work in philanthropy or even the nonprofit sector, um, you know, um, have this firewall that we are completely disconnected from. Um, Wall Street or from capitalism or, or some of those, uh, processes and systems in our country that, um, may have a negative connotation for the, the good doers, um, but in philanthropy we are not very far, uh, uh, you know, disconnected from, uh, corporate America. Most of this wealth was made by corporations and businesses, um, sometimes, uh, not in the best ways, not on the bests of a lot of, uh, indigenous and, uh, colored people. Yeah, when you look at the history of the accumulation of wealth in this country, it’s steeped in trauma, right? And so, uh, legacy wealth that has been inherited for generations now, folks may not even know the origin of their family’s wealth, uh, but, you know, uh, when we look back and we see in general how wealth was accumulated, um, you know, especially I’m from the South, North Carolina, we’ll talk about that, um, there absolutely was a legacy of, of slavery and stolen lands that, that helped, uh, contribute to the massive wealth. And you feel there are a lot of lessons we can learn from the values of, uh, Native Americans. Yeah, so you know, we, uh, as a people talk about healing a lot. We have a lot of trauma that exists in our, our communities, um, you know, because colonization, as we often think about it as something that happened 5 years ago in North Carolina, especially where I’m from, we were the first point of contact, but, uh, colonization. and the uh the acts of separation and exploitation are still continuing present day and so in my community, uh, native communities across the country, even as uh recent as uh my grandparents’ generation, kids were forcibly removed from their homes and put into boarding schools and so we’re still, we’re experiencing a lot of, uh, trauma as a result of these practices. Um, but we are, are a resilient people and, um, those who are closest to a lot of the problems that we are trying to solve today, um, as a society have, um, a lot of answers and wisdom that we can bring to the table. You say that the natives are the original philanthropists, um, now you’re a member of the Lumbee tribe of North Carolina, uh, Robinson County, North Carolina, which, which is not too far from where I own I own a home in Pinehurst, which is a little north and west I think of, of Robinson County Lumber so the Lumbee tribe. I assume the Lumber River is named for the Lumbey’s and Lumberton, the town, all named for Lumby’s, right? So Lumbey’s were actually named after the, the Lumber River, um, after the river came first, yeah, the river came first, and so, well, certainly the river came first. The name, the name of the river came first. The river’s been there much longer than, OK, yeah, so we are, um, you know, a hodgepodge of historical tribes that were in coastal North Carolina, um, that, uh, came together to form the Lumbee tribe and named ourselves after that river. Um, And we’re gonna come back to, uh, Native Americans as the as the original philanthropists, but, uh, I, I, that, that struck me a lot. I think you, you, you say, you say that at the end of the, at the end of the book is where I, where I caught it, um. Uh, we just have like a minute and a half or so before a break. So just, you know, we’re introducing this, uh, we’ve got plenty of time together. Uh, wealth, uh, you say, um, divides us, controls us, exploits us. What’s that about? So the accumulation of wealth, so I, money in itself is neutral. Wealth in itself, I, I, I, I say is, is neutral, but it’s the way that wealth has been accumulated in this country that has caused harm when we value, um, when we, you know, fear and we’re motivated by greed, um, the acts that can result as a, as a result of that to exploit the land and to exit. Employed people are, are what that’s what has caused the harm in itself. So, um, the case that I’m gonna make in this book that I’m making in this book is that wealth and money can actually be used for the good if it historically has been used as a negative thing that has caused trauma, we can flip that to use it for something that can actually help repair the harm that has been done. You’ve got, uh, 7, succinct steps to that, uh, the second half of your book, Ngani Beneshi. Uh, that is your Indian name. Did I by any chance say that correctly? I, I think that’s correct. Um, I’m, I’m a little shabby with my Ojjibbiwe these days. You don’t know your Ojib. You’re not fluent in Ojibwe. That sounds alright, but that is your Indian name. Uh, uh, uh, leading bird. How, tell the story of how you got that name. We’ll, we’ll come back to, don’t, we’ll come back to the exploitation and, and control. Don’t worry about that. This is a good story how you got that name. So, um, my tribe in the Lumbee tribe in North Carolina doesn’t have a tradition of, of naming. Um, you are whatever your mom calls you. That’s your name, right? Um, right. So, um, but, uh, when I, when I, uh, was working in North Carolina in native communities, I went to a conference where there was a medicine man. And so, uh, the medicine man was meeting with folks who wanted time with, with him to, to talk or have a session and growing up in North Carolina, my identity as a native has always been quite complicated. Um, we didn’t have these types of practices in my home in Raleigh, North Carolina, and so, but I was very curious to meet with this medicine man and to, um, see what could happen from that encounter and someone told me if you’re, if you’re really lucky when you meet with a medicine man, they might give you a spiritual name or a native name. Um, and so I met with this guy in, in the Marriott Hotel in Denver, Colorado, where this, this native health conference, so it was all, uh, I tell the story in the book is quite, um, um, hilarious and, uh, in many ways, but at the, at the end of our session where I was feeling, um, excited about, you know, the conversation we had, but also a little confused and skeptical in some ways because I’ve, you know, had such, uh, colonized ways of thinking. Um, he did offer me, um, a native name, Nagani Benache, which means leading bird, um, so I was very honored, and my first thought was what kind of bird, right? Am I a little tweety bird or am I a mighty eagle pelicans, right? Birds are vast. So, um, he explained to me that I was the, the type of bird that flies in a V formation. Um, and, uh, as I, when I left, I, I studied, uh, these birds, and, and they’re, you’re the leading bird. I’m the leading bird bird. I’m, I’m the bird that flies in the front of the V formation, which is the kind of leader that is often visible but really understands its, uh, codependence and interdependence on the other birds. And so if you watch birds flying in a V formation, it’s really like a, an amazing natural, you know, natural phenomenon, uh, how, uh, how they, they, they communicate and fly together. Uh, the other thing that’s remarkable about the leading bird’s type of leadership is that it often will fly to the back of the pack and push another bird forward, so it’s not always the one that’s out front, and, um, when I, when I learned these characteristics, um, I, I just felt really, um, uh, I was really, really happy and content about this name because I do see that’s the type of leadership that I model in my everyday life, and I think it’s the type of leadership that’s really important for the nonprofit sector. You explain how the birds communicate, which I’ve always wondered, um, they’re, they’re just close enough that they can feel like vibrations off each other and or micro movements I think you say off each other, but they’re not so close that they’re gonna bump into each other and, and, you know, be injured but that’s how they, and they, I guess they’re feeling the breeze off each other and sensing these micro movements of each other so they’re that close but not so close that they’re gonna be injured. Yeah, it’s very, it’s very fascinating. It’s like a scientific, uh, you know, a GPS built into their bodies, and the other thing I recently heard about these birds, um, is that, uh, you don’t ever find one that, uh, dies alone and so, you know, I, I wanna learn and research that a little bit more, but I think when they’re, when someone is down or, you know, um, there’s an injury or whatever may happen, uh, they, there’s, there’s a certain way that they take care of each other. And so, um, you know, it just kind of speaks to our common humanity and our interrelated, you know, being interrelated and exactly our interdependence. Now this is a, this is, uh, an indigenous, uh, belief that we are all related, and that’s what it makes me think of the birds also working so closely together that they feel micro movements. But how, how explain this, this belief that we are each of one of us related to the, to all the other. Yeah, so there, there is a, a native belief, um, all my relations that means, um, you’re all of our suffering is mutual, all of our thriving is mutual, and, uh, you know, we are, um, we are interdependent and so it’s a very different mindset or worldview, um, from sort of the, um, American individualistic type of, uh, of mindset. Um, we also have connected to that viewpoint is, um, this idea of seven generations. So not only are we all related, you know, in this room right now and that we’re relatives, um, and we are related to the land and to the animals around us, but all of the things, all of the decisions and, um, that we are making today are gonna impact future generations. So there’s an idea that I am someone’s ancestor and so what a responsibility to move through the world in a way. That is thinking that far forward about our um our young people and so these are concepts that um were uh taught to me by my family but I also uh in recent years this book gave me the opportunity to revisit and spend time with indigenous elders to remember these teachings and that and to think about, um, how to apply them in my work. You and you encourage us to each that that each one of us takes responsibility. For, uh, as you said, we’re, we’re thriving and suffering together. Um, what I’m referring to is the each of us takes responsibility for the colonizer virus. Say, say more about that. Yeah, so you know, I think how are we all responsible? We’re, we’re all responsible because we’re all affected. Um, I think some folks, um, when we, when, you know, when we learn about colonization in schools is something that seems pretty normal, right? We, um. We think of colonization and the the colonizers as heroes. It’s like the natural path of progress, absolutely the way it’s learned, right? We have holidays, you know, for, for Christopher Columbus, um, for example, and so, uh, but the realities are that colonization, um, was something that was terrible that resulted in, uh, genocide and all types of exploitation, and, uh, that type of history that we have in this country is something that we. Um, as, as the people have not come to terms with, we actually, we don’t tell the truth, we don’t face the truth, and so I think we’re still dealing with the consequences, um, and so the dynamics of colonization. Which are, uh, to divide, to control, to exploit, to separate those dynamics, um, you know, I, I, I refer to them as, uh, the colonizing virus because they, they are still in our bodies as, as a nation. They show up in our policies, our systems reflect the colonizer virus, and in our institutions in the nonprofit sector and especially in philanthropy where we are, um, sitting on, uh, lots of money, privilege and power. Uh, that leads naturally to your point about us them organizations. Go ahead. So you know, I think the philanthropy, uh, for example, can perpetuate, um, you know, the dynamics of colonization because when you look at, um, Uh, where this, uh, where this money came from and how we as a sector don’t face the realities of that truth, uh, when you look at, um, ask the question of why this money was held back from public coffers, um, that, you know, had it gone into the tax system, it would be supporting the safety net in vulnerable communities. Um, and when you look at who gets to allocate, manage, and spend it, you see a very, um, white dominant kind of mindset happening because, um, for example, if we get into the numbers just a little bit, um, foundations sit on $800 billion of assets. That’s a lot of money that has been, uh, you know, sheltered from taxation. That’s money that would have gone into public education. Uh, health care, elder care, um, things that we need for the infrastructure of our communities, um, but that money has been put there with little to no accountability. Um, private foundations are only required by the IRS to, uh, uh, pay out 5% of their assets. And so then you know you’re looking at just a small percentage of of money that was intended to be for the public good. Only a small percentage is actually leaving the doors and being invested in communities. Let’s assume it’s, it, uh, because I know there are a lot of, uh, foundations that use that 5%, uh, minimum as their maximum. So that’s, so 5% of that would be $40 billion. Uh, so the counter is, yeah, but there’s $40 billion coming each year. Could be more, but let’s take the minimum just to be conservative. And you know we’re trying to preserve this, uh, this foundation capital for perpetuity. So if you know if we, if we spent in the next two years the 800 billion, then we wouldn’t have anything left for future just future years and other generations we’re trying to, you know, we, we wanna be around for in perpetuity, uh, the foundations would say, right, right, and you know I think, I think there is a case to be made for saving some funds for a rainy day in the future. Uh, but the, the truth is that 5%, when Congress enacted that 5% rule, um, it actually began at 6%, I, I believe in 1974 and then in 1976 was lowered to 5%. The reason that Congress had to actually put this legislation forward is because foundations were not paying out any money. And so, when you think about the intent of foundations, are they being started to actually benefit the public, or are wealthy, the wealthy 1% or whoever corporations starting these foundations just for the, the sake of having a tax break. And so that that, uh, IRS minimum payout of 5% that rule was put in place to force, uh, foundations to actually begin making grants and so, you know, so it is sort of, uh, the other thing to explore if you are with a 95% that is not leaving the doors, um, if the intention is really to do good in community. We have to look at how that 95% is then being invested to generate more money for future grant making, and the truth there is that the majority of those funds are tied up in harmful and extract extractive industries, um, that are counterintuitive to the mission of foundations. Yes, you make the point often, uh, that often. Right, those investments are in, uh, are in industries that are hurting the very populations that the foundation is explicitly trying to help through it’s through its mission and and in fact funding, um. The um. There’s something else that I was gonna ask about the uh. The way the money is, um, alright, we’ll we’ll we’ll come back to it if I think of it, um. There’s, there’s a lot that organizations can gain by hiring people of color, indigenous people, what, uh, and, and very few, uh, you’re, you’re a rare exception, um. Working in in doing foundation work, uh, what, what’s the, what make explicit those, uh, those advantages. Sure, so, um, you’re right, I’m absolutely, um, an exception. I think when I started in philanthropy I was one of 10 Native Americans that I could find. We kind of found each other and what year was that? Uh, uh, this was in 2005, not so long um, and we are now, uh, there’s about 25 of us now, um, the last time I counted. Um, so yeah, there’s, there’s, you know, uh, an amazing opportunity for foundations, and I think more and more foundations are understanding to bring, uh, folks in, uh, to, to foundations that have lived experience and, and not only foundations, but, but nonprofits, the NGOs doing the groundwork, the foundations are the funders, uh, and, and of course some foundations are now actually doing their own groundwork. We’re seeing that emerging, but, but for the nonprofits doing the day to day work as well, uh, represent the communities that you’re. Absolutely it kind of makes sense, right? And, uh, found, you know, it’s funny because some foundations actually require that of nonprofits. They ask about the diversity of their staff and their board, but they themselves have, have no type of, uh, you know, values around diversity of their staff. But you’re, you, you know, the, the point is that, uh, for sure that any nonprofit or foundation to, to have folks, uh, that, that work there who have authentic accountability to community and understand and have been impacted by the issues that you’re trying to solve is gonna bring an awareness and, um, you know, about the problem in, in a different way. It’s gonna create some proximity that I think is gonna just inform strategies that that make sense. And I can’t tell you the number of times I’ve been in, uh, strategic planning processes and board meetings where decisions were being made, and, uh, I always carry my mother, my family with me, you know, in spirit, uh, into the room, and, uh, I hear these decisions or these conversations and I’m thinking like, oh my God, like, you know, this, you know, this, this would not in any way help my mother or my family that’s still living in poverty. Decision makers are disconnected. There’s such a disconnect, yeah, yeah, um. And uh I. I thought of what I was gonna ask you about or just comment on the the foundation wise we do see some foundation saying that they’re gonna spend down their assets. Uh, I, I wouldn’t say it’s, uh, needle moving, but you do hear that from time to time that there’s a foundation that’s committed now to spending it it’s, it’s assets down, you know, um, was Paul Allen, was it, uh, not the, not Paul Allen, uh, the Microsoft, uh, I think the Microsoft founder, co-founder. Who recently died, I think his foundation was Paul Allen. OK, OK, um, I was thinking of Steve Allen, the com the old comic, OK, that’s why I thought, no, it wasn’t him, but it was Paul Allen. Uh, I think his foundation is one, but there are some, so we do hear some glimmers, uh, but you say in the book a few times, uh, people, we need to move the needle. Yeah, I think I mean I think deciding to spend down is uh is a very progressive way of thinking about it. There’s so much need now, um, if we actually release the funds or even if you don’t wanna spend down, you can make a decision to pay out more um, there, there’s a lot of amazing work happening. Um, right now that is so underresourced that if we could, um, support and get behind investing money in these various movements and these, uh, in, in communities of color which are so, um, marginalized by philanthropy. You know, uh, um, the 5% that is being invested, only 7 to 8% of those dollars are being invested in communities of color that would make a big difference. And so I think, um, you know, I think it’s a conversation that the boards of foundations should think about what is the value of, uh, you know, why, why do we wanna stay in perpetuity? Like what is, is that about a family legacy? Is that really about making a difference in the world, um, because in some ways it feels, uh, I can see that as being a very selfish type of, uh, you know, uh, uh, way of thinking. Uh, if this was CNN, uh, right now I would, I would play a video of you, but, uh, I don’t, I don’t have that, uh, but in your, in your times, uh, we have to work on that at Talking Alternative. We need, we need video capture and screens and everything, uh, in your video, in your interview with, uh, David Bornstein, New York Times, uh, you said by not investing more in communities of color, philanthropy, venture capital, impact investing and finance are missing out on rich opportunities to learn about solutions. Yeah, you know, I think that I, I think of, you know, people of color, indigenous folks as being the canaries in the coal mine sometimes when, when, uh, policies fail or systems fail, um, we hurt the hardest, and, uh, but there’s just something so magical about and, and sense of pride that I have about my community because we are so resilient like regardless of, um. You know, um, all of the trauma, the colonization, the, um, you know, genocide, stolen land, we still remain intact as a people, um, and so there’s, there’s gotta be something magical about that resilience that I would, if I weren’t native, I would be interested to know like what, when you think about sustainability, you know, we have a corner on sustainability. Um, indigenous peoples around the world are on the front lines of saving this planet on, you know, um, you know, really fighting for environmental protections. Um, there, there’s so much wisdom, and, you know, often when foundations roll out new theories of change or, or changes or see strategies or there’s a new model or theory, theory of change that comes up, and I’m like, wow, we’ve been doing that in our, in our communities for years. If someone would have asked us, you know, maybe we would, we can get there faster. Is there still a Lumbee community in Robeson, Robinson County? Yes, there are. There are about, uh, 60,000, uh, enrolled members in the Lumbee tribe. The bulk of our community is, uh, still in Robinson County. OK. Now I have a North Carolina driver’s license. Will that, will that get me in? Is that, can I be an enrolled? Remember, you know, we, we’re very inclusive. We, uh, we, we will take, we’ll adopt you as an honorary brother, but, uh, you have to have a little bit more documentation to, to get officially enrolled. So it’s, it’s a stretch for an Italian American with just a North Carolina license plate and, uh, and driver’s license. Alright, um. You, uh, you talk about, um, you know, I guess, I mean, we’re, we’re, we’re skirting around these things to make it explicit the, the, the power imbalance, you know, that, um, minorities are seeking it, and, uh, mostly middle aged white guys are, are doling it out, uh, you know, piecemeal, um, the, the, the, the imbalance, you know, the, the, the grant, even the, even the word, you know, the, the granting, uh, it’s like some. Uh, I don’t know, it’s like some holy orders has, uh, has bestowed upon you something that’s a, a gift when, uh, your, your belief is that, uh, and your thesis in the book is that it’s, it’s, it’s a, it’s a right equally held by all. Yeah, you know, I think power and money, uh, a lot of, a lot of this does come down to power and ownership. Um, we are talking in the nonprofit sec sector right now a lot about equity, right? And, uh, equity is very different from, uh, diversity and inclusion. Um, to me, equity really is all about, uh, shifting power, and we often think about that from, um, uh, the lens of um, equality. So we’re gonna have the same power, which is a good thing, but to really achieve. Equity, it’s gonna actually require that some folks who have had power for a long amount of time give up more power or take a back seat so that’s not gonna happen, you know, that’s, that’s highly unlikely, like infinitesimally small, unlikely, you know, it’s, it’s a hard thing for people to, uh, to think about and especially if you have, if you’ve been privileged for so long, um, equity might actually feel like oppression for you, right, because it’s like, you know, wow, I, I’m, I’m, I have less than I’ve had, so. Um, but you know, we, I, I wanna think about this through an abundance mind frame. There’s enough, there’s enough resources and enough power to go around, um, we just have to, uh, work together to make sure that we are privileging those who have not been privileged by that power. Excellent. I love that you, you approach it from a position of abundance and not, and not scarcity. It’s time for Tony’s take 2. Thank you very much, Kate. The holidays are here. And I remembered, it’s the, I’m not waiting till 2026 to say enjoy your holidays and happy New Year. Not like Thanksgiving, you know, where the happy Thanksgiving came a week late. Whatever you celebrate, um, by the time this is published, Hanukkah will have already started. Happy Hanukkah, if that’s yours. Christmas, Merry Christmas if that’s yours. Happy Kwanzaa, if you’re celebrating that. Boxing Day, Happy Boxing Day. Whatever you’re celebrating, I hope you enjoy that time. With loved ones and friends, and also very important, for yourself, time for yourself. You want to come back refreshed. Better focused, right? Looking forward to the new year in a couple of weeks. Because this is our final show of the year. We’ll be back on January 5th. So happy New Year Everybody celebrates Happy New Year pretty much. I don’t know. There’s some people don’t, well, of course, there are other calendars. So if you’re, if you’re celebrating with the, uh, Roman calendar, Then happy New Year. Hope you enjoy the New Year. Please be responsible. I wanna hear about any, any alcohol or drug-related incidents among the listeners. In the new year, please, but have fun, have fun. Just do it With a measure of, of caution, that’s all. Enjoy, enjoy. I hope you enjoy the hell out of your holidays. And that is Tony’s take too. Kate See you next year, Uncle Tony. Yes, you will. Is that the best you could come up with? And that was it. That’s good as it’s gonna get. That’s low bar. Oh my God. Happy New Year. I’ll say it for both of us. Happy New Year. We’ve got Bu butt loads more time. Here’s the rest of Decolonizing Wealth with Edgar Villanueva. Welcome back. You didn’t go far. Thanks for having me. Glad to still be here. Yes, absolutely, no, you haven’t done anything that would lead me to shut your mic off. Um, it hasn’t happened. I’ve threatened, but, uh, it hasn’t happened. So let’s, let’s start getting, uh, positive, you know, the, the second, uh, roughly the second half of your book is, uh, 7 steps to healing, um. And uh I thought you came up like 5 short. I mean we have only 12 steps. I mean if you wanna, if you wanna share power you’re gonna have to have, you gotta have to step it up with like 12 steps or or even 15, you know, you have more than the colonizers, uh, but, but the 7 steps are, uh, in themselves they’re, uh, they’re pretty radical. Yeah, you know, um, it, it’s funny because I, I did have some resistance to, um, having 7 steps, right, because it, it, it makes it seem like there’s a, there’s a. Uh, quick and easy fix. If I just do these 7 things, then we’re done with this and we can move on. It’s a prime number, so it’s got that advantage, right? prime. That’s, that’s unique. I don’t know why, but yeah, so, you know, but I did need to simplify the process in some ways just to help us get our minds around, uh, you know, a, a process that we can begin. But there is no, uh, linear way, uh, or a quick way to, uh, to solve all of these problems or to, to undo, uh, what has been done. But, uh, there are ways to, to, to move forward and, uh, the steps to healing for me were, are, are list them out for us, just list all seven, and then we’ll, we’ll talk about them. Sure, so they’re grieve, apologize, listen, relate, represent, invest, and repair, OK. Um, so you’ve been thinking about this for a while. I mean this, uh, I, I, I, I, I just did, I admire the, I, I admire the thinking that goes into this, yeah, so some of it comes from my, my own personal experience, um, when and, and kind of coming to terms and, and with, uh, the sector that I’m working in and the disconnection that I felt as a native person in the space and spending time in my community to, uh, just re-ground myself and my values and. Um, and kind of acknowledging the, the wisdom that was, uh, in my body and in my community that I could bring to the space. Um, the other parts of it come from I did lots of interviews with folks who work in nonprofits and in philanthropy who were, uh, I think a very forward thinking, uh, people in the space, activists who are leading movements around the country to get to a place of, you know, what, what did, what have you gone through personally to kind of reconcile some of this. Um, and then, you know, a lot of this is also based on an indigenous, uh, restorative justice model, so we hear a lot about restorative justice, um, in the nonprofit sector now. This is a, a method that’s used in schools and, um, in the criminal justice system to, um, help, uh, people. Deal with uh with with things that have gone wrong to kind of get back on the right track. And so this is a a model that has come from indigenous communities where we, um, sit in circle with, with the offender with someone who has harmed us or done us wrong to get to a place of truth and reconciliation. Uh, so, uh, grieving, uh, you say everybody, I mean because of our interrelatedness where we all need to grieve, including. Uh, the people of color and indigenous, you know, those who have been oppressed, absolutely, we all need to grieve. Um, we need to get to a place where we’re just very clear and honest about the history of this country, what has happened, what the idea of, um, you know, white supremacy, which is not a real thing, right, but what the idea of subscribing to that, the, the, the harm and the loss that has caused for people of color but also white people. And, uh, you know, I think that’s, uh, we, we, it’s pretty clear the trauma and the harm that has been caused in communities of color. It’s not so clear, we don’t talk about it very much, the, the loss that, uh, that colonization and, uh, the idea of white supremacy has actually caused in white communities, but it’s, uh, it, it is, there is a loss there. I talk about it in the book, um, of, uh, the idea that white people came from, from communities where they had, uh, cultures and. Uh, tribal ways of, of interacting in many cases, um, languages and, and things that were given up in order to assimilate to this idea of being American, and I think now we’re seeing, um, folks feeling a sense of loss about that. That’s why if you see these commercials for these DNA tests are so popular right now because everyone wants to kind of remember, um, where they’re from and they feel connected to that in some way. Um, And um the uh. The, the thing you talk about too is uh. The orphans, orphans, you say that uh those of us who are descendants of of the of the settlers you, you call us orphans, how’s that? I, I call them orphans. Uh, this is a term I borrowed from some research that has been done, uh, on, uh, whiteness, and it is, it’s kind of speaking to this idea of loss, um, again, sort of giving up, uh, the, the culture, um, that may be from, from, from the home country or from where, where folks, settlers came from, giving up those, those ways of being interacting in. Community to subscribe to um this individualistic way of being in America and so with that um there’s been a loss of sort of that that mother country um for lots of white folks and a loss of identity uh because although you know I’m, I’m not anti-American, let me be very clear about that this is the greatest country in the world. I’m very proud to to be a citizen of this country, um, but there is something about, um, leaving behind. And not remembering where you originated from in order to adopt sort of this new culture here, um, you know, and, and, and, and not, um, that, that makes you feel sort of like an orphan if you’re not, you’re, you’re, you have no connection to where your grandparents were from or the language they spoke or the culture they have, um, and I feel that that’s a loss for many white communities that is actually a feeling that is shared with communities of color, um, and if we recognize that loss and that trauma that we have in common. Uh, it opens doors for a different type of conversation about race. You, you said a few minutes ago that white supremacy is, is not a real, not real, right? Why, why do you say that? Well, I mean, there’s a white supremacist movement, uh, but how are you thinking about it that you say it’s not real? Um, well, well, the idea that, that, uh, you know, a certain group of people, white people are superior because of the pigment of their skin is not a real thing, right? So this was an, an ideology that was created. Um, in order to, um, be able to, uh, have the types of oppressive, uh, movements and systems and policies that have been put in place for many years and so it is a, a mindset that has been, uh, you know, an idea that is not real but we have built systems and, um, societal norms around that. You know, growing up I was taught that, um, you know, or sort of the default for me was whiteness was the was better and so if I were to behave or dress or act, um, in a certain way that appeared to be more white, then that was gonna be, uh, a better thing for me and so we know that the idea of white supremacy is, is, you know, the idea of it is not real, but there are very real implications and, uh, for how we have adopted that, that, uh, belief. Um, and you’re, you also encourage, uh, nonprofits and teams to have a grieving space while we’re talking about, we’re talking about grieve, uh, we just have about 1 minute before a break, but, and then we’ll move on with the 7 steps. But what, what’s a grieving space in an, in an office? Yeah, so you know these, these steps are, are, are personal, but it can be applied in an organizational setting. And so I think especially those of us working in the nonprofit where we’re supporting communities we need to have um a space spaces in our in our our work life to be able to uh talk about bad things that have happened and to grieve that and to feel emotion to be human about it. And so, um, you know, I share some research in the book and, and some anecdotes of, um, folks who have, have done that, and the research shows that there, um, it’s actually, um, leads to a much more productive workplace to have moments, uh, where we, we stop the work to actually grieve and acknowledge the events that are happening, you know, in our communities. The, the, the book is, uh, decolonizing wealth. Just, just, just get the book, you know, because we can only scratch the surface of it here in, in an hour, but, uh, decolonizingWealth.com, that’s where you go. I like the idea of the grieving space, you know, uh, uh, acknowledge, you know, everything doesn’t go well all the time. It’s impossible. No organization succeeds 100%, uh, nothing. So give yourselves time and space to talk about it, acknowledge it, learn from it. And, and move on rather than it being some cloud over the organization that everybody’s afraid to talk about or something, you know, it’s how, how, how oppressive is that very oppressive and in philanthropy is especially because we, uh, we’re sort of carrying around these, the, the secrets of like how this wealth was amassed or secrets that are within these families that, um, you know, many people feel bad about and so we just need to kind of. You know, be, be truthful and honest about the history and spend time grieving over that so that we can move forward as you said, and, and that moves to our next step in terms of, uh, uh, your next step, uh, apologizing, recognizing which includes recognizing the source of the foundation money. I mean you worked for the Reynolds Kate B, is it Kate Kate B Reynolds Foundation? I mean Reynolds, uh, tobacco North Carolina, you know that money was raised on the backs of slaves, um. Uh, I’m not gonna ask you if the Kate B Reynolds Foundation acknowledges that, but that’s an example of what we’re talking about in the, in the step, apologizing. Absolutely, no, there was, there was no acknowledgement of that, and, uh, chapter one of, of the book is called My Arrival on the Plantation because our foundation offices were literally on the, uh, former estate or plantation of RJ Reynolds. And so, uh, really literally and metaphorically, I was, I was working there, but no, there was, there’s, there’s no acknowledgement of that, and I think you see that, you know, in, in North Carolina, uh, recently the chancellor of the University of North Carolina acknowledged that, uh, the history of slaves and, and building that university and that. Some of the buildings there are named after former slave owners. What most people of color want, um, is just to be seen and heard and, and to for folks to make that recognition, yeah, acknowledge and, and maybe move to apology, per perhaps that didn’t Johns Hopkins University do, do something similar that, that they had their founders were, uh, was it Johns Hopkins? Their founders were slave owners, I think Georgetown University, Georgetown, sorry, thank you, OK. Uh, Georgetown, they were priest, right, they were priests, uh, priest founders that were slave owners. That’s right. I actually know, um, uh, a, a friend of mine who lives in New Orleans is a, a, a black woman who is a descendant. Um, and was called to Georgetown, uh, to share about her family’s history, and it was a beautiful moment. They sat in community together, talking about the history, talk acknowledging the contributions of her ancestors, and, uh, there’s a big write up in, in the paper, and, uh, you know, this has been very, uh, healing, I think, for the university but also for, for my friend Karen. Um, who is now having that, uh, you know, that recognition that her, the contributions of her ancestors, you, you, you talk a good bit about the reconciliation process, uh, in South Africa, um, Canada, uh, you just, you gotta get the book. I mean, we can’t, we can’t tell all these stories. I mean, I know listeners, I know, I know you love stories as much as I do, but there’s just not enough time to just get the damn book. Just go to decolonizingwealth.com for peace’s sake. You go right now if you’re listening live. Where are you? Poughkeepsie, Schenectady. Uh, Nottingham, Maryland, just go to decolonizingWealth.com, um. OK, listening, you talk about, uh, empathic and, uh, generative listening, right? So you know, often, um, when we, when we move through a process like this, we feel bad, we’ve apologized, um, uh, the default sort of like dominant culture way of being is like, OK, I’m done with that. I’m gonna move forward and so, but before you move forward and act, you just need to pause to actually listen, uh, to listen and learn, so to, to, to, uh. Uh, for, for nonprofits, uh, you know, I ran a nonprofit, I’ve worked in philanthropy for 14 years. When I ask nonprofits, what is the number one thing that you wish funders would do differently, the response is always, I just wish they would listen. Uh, because there’s something about having resources, money, privilege and power when we enter the room, there’s a power dynamic where we, um, automatically feel that we can, uh, control the airspace and we have an agenda and, uh, the nonprofits are gonna be responsive to what we want and you know that often is the case, but. Uh, the, the best way to really build a relationship with folks where there is a, a difference in, in power and privileges, is to actually stop, uh, and listen, put aside your own assumptions, and, and try as best you can to put yourself, uh, in, in their shoes to understand their experience and their history. It’s just, it’s just gonna make you a better person. Uh, I feel like listening is a human right. We all want to be, we all deserve to be heard, and so that is, um, just something that we have to keep reminding folks who have privilege is to, um, to, to stop at times to, to also listen and to let others be heard. Yeah, put aside the white savior, uh, complex, absolutely, yeah, uh, listening, we talk about, we talked that, uh, about that a lot on the show in terms of just donors and, and I know your, your next, your next step is, is relating versus being transactional, and that’s. That’s, that’s the beginning of a relationship, as you said, you know, listening, genuine hearing, uh, to whether it’s donors or potential potential grantees, um, there, there’s a lot to be learned, it goes back to the, the value of bringing, uh, representing the, the, the communities that you’re, that you’re serving, um, OK, so relation, you want us to, uh, you want us to relate, let me ask you, uh, you, you, you read, um. How to Win Friends and Influence people you say dozens of times, you say dozens. I have trouble reading a dozen pages in a book you’ve read one book dozens of times. Uh, what, what, what, what do you take away time after reading, uh, Dale Carnegie’s book dozens of times. Well, you know, I still have an original copy from that I, um, I stole from the library of, uh, uh, my mom was a domestic worker and she was caring for a frail elder elderly man, um, and they had all this vast library, so I ended up with this little book that, you know, stole from an infirm. I, I. Elderly elderly, I know, man, I feel terrible about it. It haunts me to this day. So this is a public confession. You didn’t even think to leave like 20 bucks or something on the table. I didn’t have it if I had it at the time, um, so hopefully this is my, my way of giving back. This is, this is my reparations for, for that, that wrong. But you know, and the one takeaway for me in that book, uh, is, uh, what is really kind of connected to relating and listening. Um, is when you’re, when you’re talking to folks, people just really wanna be heard, so mostly you should listen. Um, and if you actually just listen more than talk, people are gonna think that you’re a great friend. Like, wow, Edgar, that was, that I had such a nice time with you, um, but even if I didn’t say much, it’s, yeah right. And so yeah it’s really about listening and and letting others feel that they’re important because they are um you know we I think people just feel so invisible these days that um just by giving people that moment of of feeling heard and connecting with something that they’re interested in um it’s just gonna really take you much further in building a relationship. And, and stop the the transactional, the the transactional thinking, um, you have, you, you have an example of, uh, uh. A, uh, and and like building design like office design kitchens you’d love to see a kitchen in the center of of offices. Yeah, you know, so, sort of like the, the these ideas of like the colonizing virus, it infects every aspect of our community. So yes, even the way buildings are designed. Um, especially buildings that are, uh, financial institutions, think about what banks look like when you walk in and with the, with all the marble and, you know, granite, hard, hard edges, absolutely foundation offices where you have to go through five levels of security to get in as if we’re as if the millions of dollars were in the office, right? And so we just, uh, through even how we design our offices and Um, you know, the way that they appear can be super intimidating for, uh, folks who are coming in who need access to resources. Just in in terms of designing organizations more egalitarian you’d like to see absolutely. So, uh, one of the steps in the book is represent and when you look at the, uh, the demographics of the nonprofit sector and, um, especially in, in foundations that part of the sector, uh, we still have a long ways to go with diversity, uh, particularly when you look at the board of directors and the CEO positions, folks who really hold power in organizations. So one of the, one of the, uh, ideas that I put forth in the book is that foundations should have a requirement that at least 51% or at least 50% of their board should reflect the communities they serve. Um, this would drastically change what, uh, you know, shake up what the seats on the bus look like, but this isn’t this, uh, far from what is required of, of many nonprofits. Fundders actually are, you know, requiring this of their nonprofits that they’re funding. Um, and many govern, um, organizations that receive government funding, federal funding have these types of requirements that the folks who sit on the boards must be, uh, folks who are benefiting from the services of those nonprofits. Again, be representative. Absolutely, yeah, that’s a, that’s a stretch, 51%. It’s a stretch, it’s a stretch, but you know. Um, the, the conversation has, uh, has been, uh, zero about it, so I figure, you know, if we put something, a bold vision out there to help us imagine what’s possible, maybe we’ll get a little bit further down the road, and there are some examples, uh, you cite the Novo Foundation in the book. Uh, they have a, a women’s building that they’re, that they, they’re repurposing some old warehouse or something to turn into a women’s building and. And the the decisions being made by by women who are gonna be using the building. Absolutely there’s some great examples of of foundations and and funds that are, um, really, um, putting these values into practice in their work. Uh, Novo is, is a foundation that I really appreciate. Jennifer and Peter Buffett, the founders of, of the, the Novo Foundation, wrote the forward to my. Book and uh they um are folks that you, if you get to know them, you can see that they have done this work um and it shows up in how they give. They are a foundation that absolutely sits in community and listens um to uh folks who are impacted by, especially women and girls, which is an issue they, they really care about and they fund in a way that is. Responsive to what they really need versus what the foundation’s agenda might be, is it Novo that funds for 5 years or 7 years? Is it guaranteed? You, you cite this in the book, no matter how much trouble you’re having in year 123, you’re going to be funded for 5 or 7 years for their initial commitment, right, right. And, and that type of long term commitment is, uh. You know, something that that is the best type of funding, you know, um, folks can be, you can focus on building a relationship versus, oh, I’ve got to meet these certain objectives so I can keep getting this money year after year and so to be relieved of that, that pressure of thinking about where am I gonna, you know, how am I gonna pay these salaries next year, um, really allows folks to have the freedom to think about the actual work that they’re doing in communities and, and planning and, and can plan instead of it being one only 1 or 2 years, um. Uh, so we kind of mishmash together, you know, relating and representing, um, investing. So investing is really a call to philanthropy to think about using all of its resources for um for for the public good, right? And so uh we are not uh going to be a a a a a sector that Achieves equity that that is really moving the needle on issues if we’re supporting uh with the 5% in our right hand really good work, uh, you know, mission related work but in our left hand we are investing 95% of our resources in. Um, industries and causes that are extractive that are, you know, really canceling out the positive of, of our, our resources. So, you know, there are great foundations like the Nathan Cummings Foundation, for example, who just recently declared that 100% of their assets, their entire corpus is going to be used um in support of their mission yeah and again other examples in in the book and uh we just have about a minute or so before we have to wrap up actually um so talk about your final step which is the final step is repair, um, all of us who are philanthropists or givers and as we’re getting close to the end of this year, uh, we are all philanthropists, I’m supporting. Um, uh, nonprofits in our communities, think about how we can use money as medicine. How can we give in a way that is helping to repair the harm that has been done, um, by colonization in, in, in this country. And so think about, look in your personal portfolio. Are you giving to at least one organization of color, um, to support grassroots leadership? So reach across, um, and support. Folks who may not look like you invest in ways that are helping to unite us, uh, versus thinking about some of the traditional ways of giving that have not been, uh, you know, along these lines of thinking or exercising these types of values. OK, so I’ll give you the last 30 seconds, uh, in the way that, uh, the way I learned that, uh, natives are the original philanthropists was by what you, what you talk about your mom. Yes, so, you know, I think, uh, a lot of giving, when we look at giving in this country, the biggest philanthropist, philanthropists are folks who are giving the most, uh, highest percentage of their incomes, incomes are actually poor people and so I do talk about my mom in the book, um, who, um, was, uh, you know, is actually, um, very low income, and, but yet she gave, um, to our. Community and and had it ran a ministry out of our church to support children, the bus ministry, the bus ministry. You just gotta, you gotta get the book. You gotta read about the bus ministry and so it’s like giving of time, treasure, and talent, not just resources. And so all of us who are caring for our communities in ways that are, um, you know, through love is, uh, we’re all philanthropists. Get the book. Go to decolonizingwealth.com. Edgar Villanueva, thank you so much. Thank you for having me on, Tony. Real pleasure. Next week, there’s no show, but in two weeks, we’ll return with Amy Sample Ward and Jean Takagi, sharing their 2026 outlooks. If you missed any part of this week’s show, I beseech you, find it at Tony Martignetti.com. Happy New Year again. Our creative producer is Claire Meyerhoff. I’m your associate producer, Kate Martignetti. The show’s social media is by Susan Chavez. Mark Silverman is our web guy, and this music is by Scott Stein. Thank you for that affirmation, Scotty. Be with us next week for nonprofit radio, big nonprofit ideas for the other 95%. Go out and be great.
Jacob Ward: Overlooked Consequences Of A.I. & How To Preserve Your Humanity
There’s a broad temptation we each face, to enlist Artificial Intelligence tools in all nonprofit and personal decisions. Some people have intimate relationships with A.I. bots. At what cost? Jacob Ward has spoken to psychologists, mediators, venture capitalists, and others on this question. He shares his research learnings to help you and your nonprofit determine A.I.’s boundaries. Jacob is a veteran journalist formerly with NBC News, reporting for Nightly News, The TODAY Show and MSNBC.
We’re the #1 Podcast for Nonprofits, With 13,000+ Weekly Listeners
Board relations. Fundraising. Volunteer management. Prospect research. Legal compliance. Accounting. Finance. Investments. Donor relations. Public relations. Marketing. Technology. Social media.
Every nonprofit struggles with these issues. Big nonprofits hire experts. The other 95% listen to Tony Martignetti Nonprofit Radio. Trusted experts and leading thinkers join me each week to tackle the tough issues. If you have big dreams but a small budget, you have a home at Tony Martignetti Nonprofit Radio. View Full Transcript
And welcome to Tony Martignetti Nonprofit Radio, big nonprofit ideas for the other 95%. I’m your aptly named host and the podfather of your favorite hebdominal podcast. Oh, I’m glad you’re with us. I’d be forced to endure the pain of clinocephaly if you hit me over the head with the idea that you missed this week’s show. Here’s our associate producer, Kate, to introduce it. Hey Tony, here’s what’s up. Overlooked consequences of AI and how to preserve your humanity. There’s a broad temptation we each face to enlist artificial intelligence tools in all nonprofit and personal decisions. Some people have intimate relationships with AI bots. At what cost? Jacob Ward has spoken to psychologists, mediators, venture capitalists, and others on this question. He shares his research learnings to help you and your nonprofit determine AI’s boundaries. Jacob is a veteran journalist, formerly with NBC News, reporting for Nightly News, The Today Show, and MSNBC. On Tony’s take too. Air travel civility. Here is overlooked consequences of AI and how to preserve your humanity. It’s a pleasure to welcome to nonprofit radio, Jacob Ward. Jacob is a veteran journalist covering the intersection of technology, human behavior and social change. He’s currently reporter in residence at the Omidyar Network, writing about cutting edge innovation and pioneering forms of restraint. And a strategic adviser on the deployment of AI for companies large and small, from 2018 to 2024 he was technology correspondent for NBC News reporting for Nightly News, The Today Show, and MSNBC. He’s at by Jacob Ward in all the social networks. At Jacob Ward, welcome to nonprofit radio. thanks Tony Marie. I appreciate your time. Yeah, I appreciate you having me and thank you for that glorious pronunciation. You said Martignetti. Thank you. You know, I speak a tiny bit of Italian thanks to a semester trying to be a chef in Italy. I thought I was gonna get, I thought I was gonna break free and be that guy. Turns out that. was not my path and so here we are together and I speak Italian, but I know how to say Martignetti, so that’s good. All right. Well, you know, maybe you know Italian since you were studying to be a chef. That’s right. Uh, what happened, what happened to the culinary career? Why did that wasn’t brave enough at that time to wander into an Italian, uh, kitchen. And, and with my terrible Italian and my 6’7 frame, I’m a 6, I’m a very tall dude, uh, to wander into these cramped little kitchens and say, what do you want to do with me? Uh, it was not my, I just didn’t have that that gene yet. I didn’t have that gene. I didn’t have that muscle developed yet. And so it just took me. Took me a little while. It took, it turns out that uh 10 years of uh of being a television correspondent will, will beat that right out of you. Uh, so I, I wish I could go back and try again, but yeah, that was, that was not, not my path, it turned out, but you, you took a vastly different path, uh, journalism, reporting, research, uh, and you’ve been focusing. For a long time now on uh artificial intelligence. You, you had some, you had some Uh, forecasts, I don’t know, predictions of the, uh, frenzy that we now find ourselves in, but, but years ago, uh, we’ll, we’ll get to, we’ll get to some of those in, in from your book. Um, give us an overview of your thinking though. You’re, you’re concerned about overlooked consequences, people rushing in, institutions rushing in. Overall we have we have a full hour together, but you know, give us, give us an overview of what you’re finding. The overall thesis that I am pursuing is that AI, I think is gonna do to some really fundamental cognitive and social abilities what Google Maps has done to our sense of direction. I think that the, the prosthetic outsourced decision making system that AI, I would argue, pretends to be. Is the perfect way of ensnaring an ancient decision making system that we all use the vast majority of the time that loves to let other things make decisions for it and as a result, the the point I’ve been trying to make for the last decade is that our brains and our society are totally unprepared for what this technology is going to do to us. You know, and I wrote this book, as you mentioned, uh, to try and articulate that. I thought I was like 10 years early, Tony, and then the book came out about 9 months before Chatty BT did, and since then I’ve been watching my thesis come to life. All right, the book is uh the loop. How AI is creating a world without choices and how to fight back since we’re, we’re, we’re talking about the book, we may as well get into the book, um. Just Your, your concern is that it’s what you say in the in the summary that it will amplify our good and bad human instincts, and these things are happening without us realizing, right, right, right. So I basically spent several years doing a PBS documentary series called Hacking Your Mind, and that was a crash course in the last like 60 years of behavioral science. We got to go all over the world and talk to these experts, uh, in all these different areas of human behavior. And their message over and over and over again was we make most of our decisions unconsciously and the way in which we make those decisions is incredibly programmatic. It’s very easy to predict, not easy, but very predictable and it turns out very manipulatable. We are very malleable and the. Upshot of that for me in my day job was to also be looking at all of these companies that I was speaking to, uh, you know, as a tech correspondent who were using at the time primitive versions of, of AI. This is pre-transformer models, which is the technology that made Chat GPT possible, uh, you know, where people are using sort of human reinforced learning kind of stuff, very sort of early versions of the AI that we now use so widely. And I just thought to myself, wait a minute, this is a perfect pattern recognition technology. It’s going to pull patterns out of huge tranches of, of data that a human being could never really analyze otherwise. All it does is find patterns in many cases without even being able to explain what that pattern is, just that this is the, you know, one that it can’t even describe but it can predict. And I thought, wait a minute, that is a, this is a really dangerous combination because the the this is not a technology being built by universities. It’s not even a technology being built by the military as past big knowledge innovations have been. This is one entirely being built inside for-profit companies that are going to be under incredible financial pressure to make their money back from the investment. And so, I just worried, you know, as much as, and I go into the book many times, uh into many examples of here are places that it could do fantastic things and your listeners, I think, are in a realm that could be absolutely transformed in a positive way by this. But unfortunately, the way this thing is gonna get packaged for revenue by the companies that make it, I think very often it’s gonna wind up amplifying the worst parts of our, or at least the most sort of primitive parts of our decision making system, you know, what the kids call the lizard brain. And so that that is the fundamentally what the book is about is if we let the market run wild with this stuff it’s gonna wind up turning us into an ancient version of ourselves that we that we’ve worked really hard to get away from and I and I feel like I’m seeing that playing out in real time here. Let me take a step back just to pull on something that you, you said, and I’ve always wondered about what, what is it that brought us chat GPT from the previous iteration that you described more primitive. What, what, what technology or I don’t know what, what was it that enabled chat GPT. to emerge. Yeah, so late 2017, early 2018, um, up until that point, uh, you, in order to use what was at the time the, the cutting edge of AI that was stuff that they would refer to as machine learning, neural networks, you had to do a kind of training system that was very specific. And like if you imagine that you’re. You’re a you’ve got a robot that you need to teach how to go into a sandwich shop and follow the rules properly, right? What you would have to do back then is say, OK, look, here’s the shop. OK, there’s a line of people you wanna stand at the back of the line, don’t go behind the counter where the food is, you gotta stand in that line. OK, then once the next person steps forward you step forward and in each case you need a human being. To do to reinforce what’s the right and the wrong choice in that process, and it’s very laborious as you can imagine you needed at the time, thousands and thousands of uh paid people on an Amazon run platform called Mechanical Turk that would do the training to make that possible. Then along comes 2017, 2018, something called a transformer model. And what a transformer model made possible was to pour. All of the people who’ve ever stepped foot inside a sandwich shop and gone through the process successfully, you can pour all of that data into the top of an enormous funnel, and at the bottom of that funnel will come out a set of cogent rules about what’s most likely to happen. After I’ve stood in the line for a second, then the guy you step to the front, and that’s when you order the sandwich and you hand over the cash. These patterns emerge from the, the, the machine observing all of this data. And that funnel capture system means you can. Take, you know, every star in the sky, every photograph of a mole that might turn into skin cancer, right? You can pour these things into the funnel and it will at the bottom of that without having to be taught piece by piece what’s the right answer, it’ll come up with these shorthand rules for making choices about this stuff. Fantastic, amazing. The problem, of course, is it can’t very often, usually it can’t really explain how it’s making those choices and Our brains are very quick to assume that this thing is then an expert in sandwiches, an expert in stars, an expert in skin cancer, when in fact all it is is an incredibly uh uh excellent. Pattern recognition system that’s literally all it does and so the the problem is that we tend to anthropomorphize that into thinking oh this thing could be an astrophysicist or a therapist or my girlfriend and that’s the moment that we’ve sort of entered now. Talk about girlfriend. I mean, there’s, there’s the company Friend. Oh yeah, I, I was in the New York City subway. I saw ads for friend, you know, I’ll, I’ll ride the subway with you, friend. I don’t know it’s friend.com or dotco or whatever, but you know, just, uh, I’ll, I’ll walk through the park with you. I don’t know, we may, we may get to friend. Yeah, this is the thing, right? This is, this is, this is the other side of it is that. You know, so there’s an, there’s a very famous story in my world, um, of a, of a researcher in the 1960s named Joseph Weizenbaum, and he was at MIT. He was German born and, and a very interesting guy and he was playing around with a system that he had built that was basically a teletype machine that could mirror what it received back at you in written form. And he was trying to figure out, OK, he, he, what he wanted to do was play with how will humans react to this. If I can make a lifelike conversational system, how will humans respond to this? And he was trying to figure out what’s the best way to dress this up so people will play with it, and he dressed it up as a therapist. He made it into a rosarian therapist, which at the time was the fashion and therapy. And Rosarian therapy is the kind where, you know, you say to me, Tony, you know, oh my wife is driving me crazy, and I say, your wife is driving you crazy. And you say, oh well, you know how women are, and I say, tell me how women are, right? It just is just, it is the easiest kind of mirroring back and forth. Well, Wisenbaums this thing on his secretary first. And the the story is that within 5 minutes she turns around and he’s watching over her shoulder and he said, and she says, I need you to leave the room and he says, oh, and she says, I’m about to volunteer stuff that I, I don’t want you to see, you know, we’re having a private conversation here. Within a few years, the American Psychological Association was predicting the end of human therapy. Carl Sagan was on TV talking about going into a phone booth to talk to your therapist, right? The the and and the the. Frenzy about this thing became so fevered that Wisenbaum quit the field. He was so disturbed by what he had built that he said, I’m out. And he, he wrote this great book about human, how humans basically are not ready for this stuff. And then he quit the field and he spent the rest of his life. He died in the 90s uh as a, as a uh like a climate activist in his native Germany. And I tell that story to young entrepreneurs, everybody kind of knows this story now. It’s sort of like a famous parable in Silicon Valley, but back when I was first telling it to kids who are, you know, right out of out of a business school or in a in one of these incubators we have out here. All that they would always say they’d laugh when I said he walked away from the field because they’d say, well, but he had a great minimally viable product, which is the term that people use an MVP MVP, right? You need that prototype to get your funding, right? He said he had a great MVP. He could just have gone forward, right? And I, and I’d have to be like, hey, you guys, that’s not the point of the story. The point is not that this is market fit. The point is it’s too good. At simulating what humans want out of this stuff and you know, cut to last year in the fall of last year, the incubator that Sam Altman, the creator of GBT of, uh, the founder of OpenAI, uh, he used to run this incubator called Y Combinator. Half of those kids coming out of there in this like 2 dozen companies that came out, come out of there each, uh, each session, half of them were therapists, therapy companies, right? And, and because there’s such clear market need, right? And so friend, I haven’t looked at this thing you’re describing, but right, whether it’s just sort of a solution for loneliness or an answer to the mental health crisis that young people are in right now, people just think, oh yeah, let’s sick this thing, this LLM system on that because there’s market fit and the lesson of, you know, of my career has been. We need to be thinking about other things than just market fit. Well, his, his concern that humans are not ready for this. I’m not, I’m not sure we’re more ready now. Uh, 20-30 years later, 30, it sounds like 30, 35 years later than, than when he left the field. Yeah, friend, I did just a little bit of digging. It’s, it’s a, it’s a necklace. You, you wear it looks like an amulet to me. You wear it around your neck everywhere and it hears. Thing that you hear, I don’t, I don’t know if it has a visual capacity. Yes, but here’s everything you hear and it’s everything you say. Yeah, I spent some time with this and the and the thing that is reflective about this, I can’t remember if it’s this or another one, but this is this sort of, you know, amulet, AI powered amulet is a thing. There was a company called Humane that tried to make a pin that was going to be this. And Sam Altman and um this guy Johnny Ive, who was one of the main designers at Apple under Steve Jobs, they’re now teamed up. Johnny Ives’ company got bought by Sam Altman, and they are in theory creating some kind of new form factor for AI that everybody expects will be something like a pin, a necklace, you know, something like that. And, and the thing is, right, I’m shaking my head. Yeah, yeah, yeah, ladies and gentlemen, Tony is definitely shaking his head right now because, but this is the thing, right, is that like. You know, we are of a generation that that has heard some, you know, knows some things about surveillance going wrong and knows some things about profit motive going wrong, right? But the generation of kids that are building these systems, and I don’t remember if it’s friend or another one of these, but I remember listening to one of the founders of one of these companies talking about it and you know, there’s just this sort of like college freshman’s idea of what. You know, a, a, a sort of sociological impact of this thing, you know what I mean so much insight. Yeah, and so that that idea that sort of, you know, and, and, and the thing obviously I hope to get into in this conversation is one of the things you learn as a young software person is that scale solves your problems. So you’re trying to ship a minimally viable product as quick as you can and grow the number of users as fast as you can, not just for revenue purposes, but also because that’s your quality assurance system, that’s your way of catching bugs and getting rid of them. So the more people using your thing, the the more bugs will get ironed out and the better the product becomes in theory. Well, that contrasts very dramatically with how hardware works. If you are the Ford Motor Company. And you have a bug in the F-150 you’re building and you ship the the more of those that you ship, the more you are compounding your problems you have that many more trucks you gotta fix, right? And I am, I have sort of come to develop this, this theory that that while AI people are all trained in that software idea where if we just ship enough of these amulets we’ll work it out. I actually think it’s more of a hardware. Problem because we are the hardware and the more you you build on to somebody’s habits of, of, you know, something problematic. I think the more we’re gonna see those effects compounded by scale. So I really worry about this this move fast and break things assumption, which, you know, I’ve, I still have people in Silicon Valley to say without irony the moving fast and breaking things is how we do things right, you know, that’s the best way to do it. We’re talking about the broken things being human beings. Yeah, and that’s the problem, right? I think we’re we’re poised to break some of the basic circuitry of human interaction and human cognition, and I worry about that. Um, maybe I’m beating this further than should, but listeners know that they suffer with a lackluster host. Just last week, the New York Times had a, had a profile of three adults. Who have intimate relationships with uh some with an AI large language model. 11 of them, one of them has married one of them claims that they have intimate sex. That’s the, that’s their phrase, it’s not mine, intimate sex with their AI partner. Uh, one of them is an AI is herself an AI researcher inside an AI incubator and, and one of them has married. His or her, I don’t remember what, uh, AI companion. I mean, we’re, we’re talking about intimate marriage and and intimate sex with with something that is, is an artificial entity. And before your listeners start to scoff at the idea that these are, you know, that these people must be deranged or you know, this, that or the other, there’s instances again and again, and they’re all anecdotal for the moment, but they’re beginning to get locked in for some real quantitative study. Of people with no history of any kind of mental health trouble, no documented history anyway, right? Falling deep into delusional thinking about these systems. And I, I would argue, like one of the ways that I’ve been trying to sort of parse my thesis as the statistics are coming to light is thinking broadly about the umbrella of what I’m of what people are sort of calling informally AI psychosis. And I’m trying to subdivide that into these different categories, and the one that you’re describing this attachment category is a really big one. So people are just in the same way that, that, you know, as I’m going back and forth with a Claude or a Gemini or a chat GBT and I’ve come to believe over time that this system because it occasionally interjects some stuff that that shows some memory of past conversations with me, I begin to think, man, this thing understands me. It gets me, it knows me in this fundamental way. There’s a, there’s a sort of a benign version of that in which you are sort of under that misconception as a product user and and it it’s just sort of like smoothing your experience with the product. The extreme version of that is what you’re describing where people truly come to believe that these systems are synthetic soul mate, they, you know, are supplanting a a lack of human contact in their lives, you know, all that stuff. And I would say it, this plays into multiple things like, you know, first of all, there’s a loneliness crisis in this country, not to mention. Half of the country. It holds 98% of the wealth and the other half holds 2%, right? So there’s a huge swath of human beings in this country who simply don’t have the time for human attachment really. Like I, you know, I’ve talked to, I talked to a woman who, who treats her AI chatbot as a as a boyfriend, you know, when you ask her about the details of her life, she sleeps 5 hours a night, she works two jobs at the airport. She’s got no time to create an attachment with somebody. Meanwhile, And this is the problem, right? And this is part of why I call my book the loop is that all of these effects seem to compound one another. Yeah, yeah, as we get into a world in which people are used to only a hyper sexualized, always available chatbot intimate experience, how are those people going to form real connections with other people, right? Who, who aren’t always on and not always sexualized and not perfectly tailored to to your desires as a product. And so my, my, you know, I, I just think we are. You know, so, so just to sorry, you cut me off here turn when I gone too long, but a couple weeks ago. Uh, I think it was 3 weeks ago now. OpenAI actually released some numbers showing how often, how prevalent the instance of what you are describing is among their users. They were doing categories like excessive emotional attachment, mania and psychosis, and suicidal intent, and they were showing the the um the numbers of people who are exhibiting all those kinds of things. And you know, it’s a, it’s problematic for many reasons. First of all, it’s a, it’s an internal study. Second of all, they don’t show it over time, so they’re not showing whether the numbers are going up or down. And, and we just got to kind of, you know, no, this is not independent researchers, this is, this is their, their release. So we don’t get to see, we don’t get, nobody else is checking the stuff out, but Um, they say that 0.15% of users, for instance, are openly discussing suicide, talking about their intent, talking about how they might do it, you know, seeking advice, essentially. And the chatbot is trained in theory to catch that, push them to uh dial the national crisis line, you know, there’s there’s some stuff that it’s supposed to do, but they say it’s not perfect. There’s many cases in which that’s not the case, and we’ve seen some some some uh families filing suit on that basis. 7 and I think 2 weeks ago, 77 different families filed suit in in California alone. Now, 0.15% of the total users. That’s 800 million weekly users. This is the fastest growing piece of software in history, right? 800 million weekly users, 0.15% of that. It’s, that’s about 1.2, 1.3 million people every week. Openly discussing suicide. Now the national rate of suicide, uh, attempts on an annual basis is in the single digits or I think it’s actual 10 tents is like 0.6%. So this is a much smaller number than that national instance, but this is, but that’s an average, the sorry, an annual average 0.6%, 0.15%, the number of people in ChatGBT, that’s weekly, that’s weekly, right? So the thing that this. Shows me, right, is that not only are people forming these very powerful and deep attachments to these systems. Um, they are, uh, there, there’s a, a. Uh, you know, a, a kind of, uh, like the question ends up being like, is this just a reflection of society and therefore it’s not, you know, a company’s fault that society’s statistical significant, you know, statistical instance of this bad thing is happening that was the argument of the social media companies made for years. Or you know, at the same time you’ve got the company talking about trying to you know opening eye literally saying we want this thing to be an emotional companion, not just a productivity tool, and they’re building it to be your friend because that is the best way to get you to use the product. So this is this moment in which in which, you know, I talked to some people and they say it’s not there, they, they don’t have any responsibility for this, this is just how humans are. I have other people saying they have a deep responsibility for this because they are specifically playing on. Human attachment, this fundamental need. And that goes back to your title, the loop. The, the more, the more affection and attachment you feel, the greater your reliance and the, and the closer you’ll get that’s right to the, to the artificial LLM tool. That’s right, that’s right. Now I, you know, I, I want to point out here, right, that like the vast majority, as, as we’ve seen in the numbers, the vast majority of people are not. You know, coming to believe this thing is a synthetic soul mate, right? But I would argue that significant numbers, a significant number are and I think anybody, and this includes me, who misapprehends what this thing is, right? Who comes to believe that it knows more than it does or that it is somehow, you know. Uh, uh, you know, a, a, a brainstorm partner or, you know, it can, it can be your sort of, you know, your, your, uh, uh, you know, your conciliary in some way. That’s, that is itself, I think, a kind of psychosis that we are all falling into. And what we’re seeing right, already in the studies, for instance, so on an institutional basis. We’re already seeing that it’s it’s flattening. The kind of creative thinking that you want out of a group of people. This is one of the things that I’ve been really bothered by, uh, you know, if you look at, um, those, uh, nature human behavior this year, uh, came out with a story, uh, I mean a a study called CATGBT decreases idea diversity in brainstorming and what they found is that when you compare a group of people who are looking at a thing on Google to, uh, you know, or in conventional sort of web searching to a group of people who are using ChaGBT for brainstorming. The number of ideas and the language around that ideas flattens out in this really particular way, in a measurable way. Just you get less ideas out of the group, because everyone’s kind of relying on the same on the same thing. People have also found this to be true in writing about the Wharton just did a study that showed that if you ask a group of people to write advice on health and wellness, and they, and you let some of them use Google, and you let some of them use an LLM, It’s the same deal that the Google writers, and I can’t believe I’m here defending Google search results, right, you can imagine 10 years ago I might have been saying something else, but like, you know what I mean like this is where we’re at. The Google search result people, they came up with a much wider variety of ideas and their language around it was more nuanced and interesting and subtle and diverse, right? Whereas the LGBT people, it was just much more inane, much more the same. You know, and so it’s that flattening that I worry about, even if we’re not talking about fully losing your marbles in the with this stuff, it’s still eroding something. Yeah and On Tony’s take too. That’s not right. It’s time for, it’s time for Tony’s take too. Thank you, Kate. I’ve been doing, uh, some travel lately. I was flying to, uh, Thanksgiving for about a week or so, and actually, uh, I’m flying tomorrow. That’s why I’m, I’m in a hotel tonight. That’s why I don’t sound like my usual high quality studio self. You get, uh, not only a middling host. But uh I also sound middling. So it’s, so the, the two, so now everything is equal. It’s not a middling host with a good quality mic. It’s a middling host with a laptop mic, which is a middling a lackluster mic. So. Everything, everything’s uh on par. As well, not as you’d expect, but everything’s everything’s uh equivalent this week. But the air travel, that’s what I wanted to talk about. Uh, I find folks are generally very civil and decent and humane to each other as we’re all flying together and even over Thanksgiving holiday, which is. the going and coming are the two of the most heavily air travel days in the US. I, I’m pretty sure the Sunday after Thanksgiving, which is when I flew. Back, uh, is the, the most heavy, is the heaviest flying travel day for the in the country. And you know, people are still very decent to each other, no patient, uh, for boarding, helping the elderly or short folks with the overhead bin space, you know, getting the bags up there, um. Changing seats, if, if two, you know, family members aren’t seated together, cause I don’t know, some reason the algorithm didn’t put them together or whatever, you know, people surrendering seats. I saw that. Um, and deplaning, you know, just patient, waiting your turn, you know, so, you know, I mean, I know there are exceptions. We’ve all seen the, uh, Pugilistic passenger videos, and people are battling each other in the, in the aisles or have to be dragged out in zip ties or duct tape or whatever by police. Yeah, I’ve seen those, I’ve seen those so that I, but overall, I find people Even in the busiest uh air travel days. Just like I said, decent to each other. Civil, humane, so that’s wonderful, that’s wonderful because you know people could be posturing to get off the plane early because they gotta get somewhere, get get to their connection, you know, whatever. I don’t see a lot of that. I, I hardly ever see it, hardly ever. So that’s good. That’s good. Air travel civility. We’re doing well, let’s keep it up. Do your part, do your part to be civil. And that’s Tony’s take too. OK. Since I’ve never been on a plane, I can only go off what I see on social media. So what I’m hearing from you, it sounds like you’re pretty lucky with your. No, it’s not that I’m lucky, it’s that those fighting, uh, passengers, those belligerent passengers are the rare exception, but that’s the ones that make the social media, you know, a routine flight with everybody being humane, civil, courteous, polite. Nobody’s gonna watch that. Nobody’s even gonna record that. That would be 2.5 or 3 hours of total boredom. Nobody’s gonna watch that, but the 8 seconds where there’s a flare up on 1 and 1 in, uh, it’s probably 1 in like 100,000 flights and there’s this, there’s tens of thousands of flights in the US every single day. So don’t, don’t judge by social, uh, what you see in the social networks. We gotta get you on a plane, uh, you know, yeah, I, what, 22, right? 22? Never been on a plane? Yeah, we gotta fix that. I gotta fix that for you or something. I’ll just fly you somewhere and then we’ll have lunch and fly back or something, uh, we got. We gotta fix that. We’ve got Bou but loads more time. Here’s the rest of Overlooked consequences of AI and how to preserve your humanity with Jacob Ward. What I believe it’s eroding, I’ve been saying this for a long time because we’ve had many shows on artificial intelligence, uh, is. Creativity. Basic creativity. I, I, I think when When you’re looking at a blank screen in Word and you need to fill it. That’s, that is the most or you need to get started filling it. That’s, I think the most creative act in writing. You, you’re, you’re not, you’re not relying on any external source. You’re relying on what you know to write about the topic that you’re tasked with versus the very last century of you, Tony, pardon me how very last century so it’s so quaint typing. What are you talking about? versus using one of the large language models to write you the draft and you become the copy editor or maybe you even become the managing editor, but give yourself another you’re, you’re editing another things initial draft that I think is seeded the most creative act in in writing or composing music. Uh, right now, right, we, there are certainly there are, you, you can compose music in these, in the with these tools, um, and and the thing to understand, right, is that, is that the product that it puts out just because it’s mimicking a thing, this is the thing I, this is, this is the, the need to hold two concepts in, in, in one argument that I’ve really struggled with in, in my, in my work is on the one hand I’m saying this thing is just a parrot. On the other hand, I’m saying. It’s ability to parrot language and music and art and the rest of it is good enough to tickle the part of your brain that likes music and art and the rest of it. It’s it’s good enough to make your brain go, oh this is good music, or this is convincing writing. I mean the studies that we’ve seen already on, for instance, for instance, politically persuasive writing. Has shown that LLM generated stuff is better. It’s more effective than human generated stuff. Now this is because it’s a pattern-based system and it’s done the analysis, you know, I can’t tell you what the analysis is, but it’s done the analysis. And so the thing that I want people to not get confused about is. Just because it is a simulation of life, you know, a simulacrum doesn’t mean it’s not going to be incredibly effective. And so what I think we’re gonna wind up in the, the thing we’re gonna have to defend for ourselves is uh the, the term I keep coming back to because it’s a very bad word in Silicon Valley is friction. The the pointless friction filled act of sitting at a blank screen and writing something or sitting with a blank piece of paper in front of you and writing something. That’s it’s less efficient. It’s not even gonna produce good enough work, right? My 12 year old was just the other day saying. Man, I hate using Cha GBT for images because the images it puts out, I find myself thinking, man, I really wish I could create an image as good as that. But I don’t, but I don’t, I, I like making images and so I’m gonna just keep doing it on my own, right? And. You know, my 12 year old for president, like I just think she’s so smart about that, right? But this is the thing is that the market’s not going to reward the way we used to do it. It’s going to reward the new way because it’s effective, because it’s efficient. And so we’re gonna have to, I think, push back against that a little bit if we want to protect. Some long term goals we have for ourselves as a species protect humanity. I mean, I, I think this is what makes us human is the is the the creativity you’re talking about flatlining when brainstorming groups have uh a large language model like based to start at to me that’s antithetical to brainstorming. You’re all supposed to bring your own individual perspectives and no idea is, is eliminated at the at the first phase. But you’re not supposed to all start with a, with a common. The only common level is we’re all human and we all bring our multiple experiences to this topic that we’re brainstorming about and perspectives, and we contribute them, uh, until, you know, until we’ve run out of time and then we start to parse them down. But you’re not supposed to come with a common basic, uh, a common foundation to a brainstorming session, right, exactly, exactly. It’s not necessarily about the efficiency of it. I, I absolutely agree with you. Here’s the other part of it, right, is that like. I need a glass of wine. I need a glass of wine, the edge off. I ruined, I ruined so many parties invigorating, you know. So here’s another thing I would say, right? Here’s another 19th century concept you’re talking about Microsoft Word. Let’s like think about pre-Zoom life, right? So, so one of the researchers that I spent some time with and really was, uh, blown away by is, um, uh, this, um. Uh, she’s, she is a European and American. She holds appointments in both places. Beatrice de Gulder is her name, and she studies. Basically, um, she used to be thought of as kind of a crank by a mostly male research world who didn’t like the ideas that she was playing around with and what she was playing around with was the idea that started with something that came up in the first in World War One and then she refined, was the idea that people whose visual cortex has been damaged, that the, the optic nerve, you know, between the optic nerve connection between your eyes and your brain has been damaged, cut off in some way. In World War One, it was typically by some kind of horrible trauma. Now you can study people who’ve had it cut off by a stroke, a lesion. She studies these people and she’ll do things like, so they come in and they’re blind. They’re blind, you know, they have canes, the whole thing. And she early in her research put one of them uh into a hallway because she’d been striking out with every other experiment. She put him into a hallway and put this little obstacle course in front of him because she noticed he just moved in a weird way for a blind guy. And They take his cane from him and they say, can you walk to the end of the hall? And he, and they don’t warn him about the obstacles. He walks toward the first one, he turns sideways, scoots past it, turns the other way, scoots past it. There’s a blind man, right? He gets to the end of the hallway and she said, and they rush up to her to him and gasp and say, how did you do that? And he says, do what? He has no conscious memory of having done it, or of any of the mechanical stuff he needed to do with his brain and his and his muscles to make that happen. So De Geler then, after that, begins playing with the with new experiments around the same kind of person. And she starts rigging up faces, their their faces with a bunch of little sensors and then seeding them in front of a big screen on which she will show huge human faces, grinning or frowning or masks of pain or masks of fear, and then she’ll ask these people, what do you, what do you see? And they’re sitting in front of this huge grinning face and they’ll say, are you kidding? I’m, I keep telling you I’m blind, I can’t see anything. What are you talking about? But the sensors on their face, when you register that when you show them a a smiling person, their face starts to smile back. You show them a frowning person, their face starts to frown back. There is a non. Optic nerve way we are catching emotions from each other and transmitting them, which is how we are able to escape danger, right? snake comes in the room, my face freaks out. I, I make the face that I would make with a snake. You’re on your feet and out the door before you even, you know, you, you know, we don’t even have a conversation. You don’t ask me like what kind of snake is it, right? You, we are out of there. And what she and all of these researchers that have come since have shown is that sitting together physically, there is so much stuff being passed back and forth between us, stuff that they can they can measure if not directly observe. And so I think like the idea that we have created this vastly more efficient system that lets you and I speak to each other from 3000 miles apart and I’m thrilled that we are, right? But if you, but the assumption that this is as good. As you and I sitting together in person and making up ideas, right, we are so the products are so far out in front of actual scientific understanding of what’s valuable in human connection, and that is a, a thing I’m, I’m, uh, bothered by and uh no one wants to pay any money to hear about it. Well, people don’t have to pay money to listen to, to, to hear about it here. Yeah, no, absolutely, we, we need to keep our, I, I get, I go back, keep our humanity, remain conscious that this is a tool. It’s, it’s wildly helpful, uh, um, but it’s not, it’s no substitute for. Being, uh, IRL, uh, right in real being person to person, any more than friend is a substitute for intimate sex with someone that you’re intimate with, uh, it’s, it’s, it’s, it’s, it’s our, yeah, it’s our humanity. All right, look, um, I need a bottle of wine now, but I do wish we had a, we chat chat over this chat about all this over a bar at a bar, um. You talk some, you think, uh, you think a good bit about um social media moderation. What we’re all, what we’re all facing there. uh, why don’t we, let’s talk about how we’re being. Guided, led, uh, controlled, I don’t know which, which verb you you what kind of verb you prefer, but what’s happening to us, uh, in the, in the social networks? Well, I mean, one thing that we, we saw, um, you know, in the, in the social media era was the capacity for human beings to sort of tailor their information diet to as tight a little bubble as possible, right? And typically that bubble was Was defined by how many other people you could find that that were interested in that same kind of bubble, right? Could you subdivide somebody’s interests in a conspiracy theory or you know, Kashmir or whatever else, right, to could you, could you put those people into a bucket and find enough other people that also fit into that bucket that was that’s the essential, you know, task of social media as a business. Well, now you don’t even need other people, right? The problem with AI that that, you know, another of the difficulties with AI is that your information diet. Suddenly is, is just you, and yet it gives you enough of a feeling that you are connected to something larger than yourself, which was what the social media made possible, the feeling of connection with uh with something larger than yourself. Now suddenly. a chatbot is going to give you that capacity, that feeling of having tapped into something. Without anyone else having uh being involved in it, right? I mean, now, this is, of course, you know, not taking into account the fact that these companies are trying to draw from. Actual, you know, ground truth, you know, reporting and whatever, whatever else, right? But, but in terms of what the what the technology is capable of doing it is capable of giving you the impression that you are tapped into something larger than yourself when you’re when it’s just you by yourself. And so I definitely worry about the, you know, if we thought the information bubble problem was bad in social media, I think it’s gonna be even worse in this case because of that kind of isolation. You talked some about uh forms of restraint. Yeah, this, this sort of gets us to, you know, how to, how to preserve our humanity, but let’s, you know, let’s start to move to brighter. You know, we do have control. We are humans. We do have. We call it forms of restraint, which I find interesting. So I’m playing around with a new concept and I, and I, I gotta find a day job before I can afford to to write this book. But I, but I, um, the book is called Great Ideas We Should not Pursue. It’s based on something my grandfather used to say. He’d say that’s a great idea. Let’s not do that. And, and it’s, it’s a, it’s a kind of uh mantra that I, I, I knew I was on to something when I, you know, I’d, I’d say it to to founders here in Silicon Valley and, and, and their heads pop off. People just hate that phrase here. And so I think I’m on to something because you’re clearly, clearly if it makes them nuts, uh, there’s something, there’s something there to to explore because it’s so antithetical to the moment we’re in, right? What, not pursue a thing that you could do like not go for market fit? Why wouldn’t you do that? Well, here’s one place in which, for instance, you’re gonna need to do something kind of nonsensical as an organization that I think maybe your listeners in particular might might benefit from. So you’re gonna inevitably have some company. Maybe there’ll be an evangelist inside your organization or on your board who says you should implement AI immediately to wipe out. Your costs when it comes to the entry level work that uh you’ve until now relied on recent college grads to do, right? The filing, the, you know, the, the customer service, the receptionist role, that kind of thing, we, you’re not, you’re not gonna need it because the AI can do it. Well, here’s the thing, the long term problem that that is gonna create and people, uh, much more than me have already been publishing on this topic. So the, the, the effect of that is going to be wiping out. Those 1 and 2nd jobs that kids get out of college at these organizations. And let’s say you cut to like 6 or 7 years from now when you would typically be promoting that 1 or 2nd job. Occupant into that third level role. Maybe now they’re gonna manage somebody, right? Maybe now they’re they’re gonna be outward facing and really speak for your organization in public, right? They’re gonna have to have developed the soft skills. One of the misconceptions that I think even the makers of these systems are operating under is that somehow we will carry forward. You know, and this is funny for people who really are eschewing college and saying you don’t need a university degree and education isn’t really necessary, all that stuff, right? That what they, I think, have failed to recognize in themselves, the assumption. That there that you’re gonna carry forward the critical thinking and the socialization that education gives you in theory, and as a result, you’re gonna be in a position where nobody’s qualified for your third level. You know, you’re that 3rd job for that first management position, whatever it is and so the, the friction, right, the blank screen uh uh piece of of human preserving illogic that I think your listeners should maybe consider is you’re gonna need to find another way to train somebody up in that role. So even though you’re gonna have somebody saying, listen, you can take it off your balance sheet that being a customer service person, don’t do it. Use the technology if you feel it’s, it’s ready for it, but you need to save that money because what you’re gonna need to do is bring some somebody in just out of college and put them in a kind of. I don’t know, we could call it an apprenticeship, a residency, something where they’re in your organization, learning the ropes, learning the place, learning to be reliable and professional, learning to be the kind of person you’re gonna value in a few years. And bring them up in that role. One of the things that you could conceivably do with that person, for instance, is give them an enormously more creative set of responsibilities. You could say, listen, I need you to be coming up with the weirdest ideas you have, right? I need you, I need your weirdest thoughts for how we’re gonna like breakthrough on TikTok or your weirdest thoughts on how we should, you know, assemble a youth advisory committee or you know whatever but like. The the market logic and the sales pitch of these companies is gonna be you don’t need this stuff anymore, but I think instead that the illogical and absolutely crucial role of somebody leading an organization is going to be. Keep that budget, save that budget, and use it to make your people better. Because if you don’t, this technology is going to rob you of those people just when you need them in a few years. And you mentioned this, I’m just, I just reinforcing that it’s it’s not just the uh like the intellectual part of the work, but it’s the socialization. It’s, it’s the socialization to your, to your organization’s culture. That someone who starts and works their way up over 456 years isn’t going to have when they come in day one and they’re leading a team now and they have to they have to understand the culture and the team and the substantive work. I think that’s absolutely right. The socialization, the, the, um, the self-discipline. I mean, I was talking to a guy the other day. Who I was, I was at a dinner party and he and he he was lamenting that his daughter doesn’t want to be a lawyer or an engineer. She wants to be an artist, and I said, I don’t know, man, have you seen what’s going on with lawyers and engineers right now? Like I don’t know that your kid would actually do much better in that market at the moment. And and if anything, I found myself thinking, man, if you actually, you know, I, I’m again I’m I’m, you can hear my love for my 12 year old, she’s she’s like bjork. She just like, like creativity comes out of her and. She is driven by that creativity to be fairly disciplined about her output. She really, you know, she just did the uh the Nano Remo, the uh, write, write a novel in a single month thing in November. It’s a, it’s a writing event in which you try and bang out a novel in a single month, you know, she sat there and banged that thing out, you know, and, and to my mind like. I said to him, I was like, a prolific and disciplined creative person could be in fact the most valuable kind of professional in the future, because everything else in the market is gonna tell you, you don’t need that, right? But if you can actually generate real self-discipline and real organization to your creative thinking. That’s the one thing I think that could that that the market won’t be able to take away from you or you, you know, or that or that will still be really, really powerful and and valuable in the market. So I just hope that that your listeners like everybody will will just think about like how do we protect that rather than fall for this line that oh you can operate a, you know, I mean Sam Altman uh at at the beginning of 2024 said to a podcaster, Alexis Ohanian, he said. Um, that he and his buddies, his tech CEO buddies have a bet going as to when we will see the 1st $1 billion company. Right, that’s their vision. It’s not. Freeing your time and making you more creative, it is. Pillars of wealth, you know, towers of wealth, uh, where no one else gets a job, and that doesn’t feel to me like, like what what we should be working toward. That’s dystopian to me. Pillars and silos and one person if, if, if one person so one each person has a building then they can with that kind of wealth and so many buildings you get to have, you know, that’s right. I don’t know after the, after the, after the tech bros by all the all the land, buy all the real estate, where do the rest of us. Well, you know, we found out that. This also quaint, I suppose. We found out during COVID. What, what jobs are truly important. To our, to our functioning, to our survival. Now I live on a, I live in a little beach town in North Carolina that the ocean is across the street. I’m on, I’m one tier of one row of houses away from the beach. And to me it was the garbage men. Uh, the, the food store workers, my local food store, um, uh, restaurant workers, but, but in my town, uh, it’s so small, we don’t have delivery, you have to go pick up, but they were hopping, they were hopping the meals out into the parking lot, you know, in bags. You, you couldn’t go in the restaurant, um. Postal workers? I, I, I, I still needed my mail. Um, technology, I, I don’t want to go too far, but I needed my ins I needed my technology infrastructure. I needed my spectrum to be working. Uh, I, I mean, I, I think that’s, I, I don’t know, maybe, maybe I’m missing one or two things, but the, the, the people who are actually doing the work, I would have been fine if, if Wall Street had shut down and I, I would, my money would have gone in the bank and it wouldn’t earn as much, but I’d still be surviving. I’d still be, I still, if I have the garbage being picked up and if I can go buy food. Then I can still survive quite well without without Wall Street functioning. Well, this is the thing is that it’s not clear to me, you know, that the vision that so you know, the, the folks making these technologies, the people who are at the top of the Magnificent Seven, as the big companies are called, right, they, they really seem to believe and I I think they really believe in their heart of hearts that there is a utopia coming. In which, you know, made possible by AI in which we eradicate cancer and we, you know, and, and everybody gets to be a watercolorist in their garden kind of and, and, and I just think that that. There are multiple problems with that. One, the math just doesn’t quite work out, uh, on, on everybody getting to relax all the time. Two, culturally in the United States, especially and especially in Western democracies, we don’t like to just let people hang out. We really are allergic to the idea of paying people for free time. Three, there’s something called the Jevons paradox. William Jevons was a 19th century British economist who came up with this paradox where we were burning coal more efficiently than ever, and yet we were burning more of it than ever. And it’s come to be, uh, used to describe basically any case in which you use something more efficiently, you wind up using more of it. And I think that’s gonna be true of free time, uh, of just our time in general, that if you, if you give somebody the opportunity to work. As hard as 10 people, then they’re gonna end up having to work as hard as 10 people. It’s not that they’re gonna get 10, you know, have to work 1/10 as hard, you know, only a 10% of the time. That’s not how it works. And well, we saw that play out with the, with the, the, the, the free time that we were all gonna get from smartphones because they were gonna make us so much more, so much more productive. We’re gonna have a plethora of free time. I, I, I haven’t seen any more free time. I see you can’t get away for more hours. That’s right. And working in environments where I didn’t previously work. This is the reason I go camping all summer, productivity filled those, those additional, uh, illusory hours. That’s right. That’s right. And so, you know, I just think that the, the what, what, what these folks seem to believe can happen. I don’t think is actually something that that we culturally or economically are are prepared to actually make possible. And you know, so the founder of Anthropic, he was just profiled on 60 Minutes the other night and, and in an interview with uh with Axios, uh, this year, he said a really interesting thing where he basically said, The truth of this, I’m paraphrasing here, but basically the truth of the matter, he said, was essentially This technology might make it possible for us to cure cancer and make and create vast riches, and we might have 20% unemployment. Basically that was his that was his thing, right? And I admire him saying that out loud. Like I’m glad that he’s that he’s making that warning. I’m not sure why a guy who knows that keeps plowing ahead on making the technology, but OK, but I, I think there’s there’s no because he’s not in the 20%. Well, that’s correct. That’s right. That’s right he aspires to be in the 0.001%, about towers of money. That’s right. That’s right. You know, I, I think that we, this, it is going to require a fundamental renegotiation about the value of human beings, you know, that’s gonna have to do with, with both a sense of purpose, right? It’s my daughter saying I like to draw a thing even though it’s not as good as as what Cha GBT makes, right, a feeling of purpose and accomplishment and. GDP is, you know, your, your productivity. I think we’re gonna have to divorce our financial value from our productivity at some point, and I don’t know, I don’t think we’re on the path to that. Like I don’t think we’re very good at that in this country, but, but that’s what I think this technology is gonna sort of force on us because we can’t all work 10 times as hard for 1/10 of the money. That’s not gonna work. Let’s focus more on uh on some, some forms of restraint. So if you can do, if you can share one more on an institutional level, and then I’d like to spend a few minutes on restraint in individual personal restraint, but you got one more for one more that you can share on the, on the nonprofit level. Well, on the nonprofit level, I really just think that that what you have described several times in this conversation is is the right thing to think about, which is that you have to protect. The awkward open. Creative tasks, even if the technology is is saying, oh no, don’t worry about it, I’ll take care of that. And so, you know, we’re seeing, I think the best companies thinking about this stuff now are recognizing. We’re not gonna, we’re not gonna cut our costs yet. We’re gonna hold off on that this is not unfortunately the, the majority of these companies. Majority of these companies are just going ahead and cutting costs even before they know whether AI can can fill in, um, but the, the smart companies I think are saying OK. We have these tools. In theory, it’s gonna automate this set of tasks. Let us as a result hand that time back to people, right? If we’re really gonna buy this idea that this technology is going to free us up and let us become a better version of ourselves, we have to enact that. We have to enact that. You can’t, I’m skeptical about that. Yeah, me too, me too. But if in theory I don’t have to, you know, uh, spend as much time doing a travel booking or spend as much time making up a calendar of events or whatever the thing is, right? Then the expectation I think should be that that person gets to spend that saved time doing something that you know that is long term thinking that is you know uh cultivating some some creative priorities that is connecting with other people in a way they don’t normally get to. And so while the while the the promise of this stuff in theory is to save you work, I think especially as the leader of a nonprofit. You’re actually gonna have to do a little more work in the short term to think, OK, if I, if I could give each of my people 20% of their time back, what would I want them to do with that time and getting getting that air traffic control system built, I think is the is the institutional is the short term institutional thing before you start saying I don’t need this person, which is what all these companies are gonna try and convince you is the answer. An example of that could be uh sabbaticals, additional time off like 4 day, I mean there is, there is a national, there is a national organization for a 4 day work week, a 4, a 4 day 32 hour work week, not a 4 day 40 hour work week, a 4 day 32 hour work week. I’ve had guests on who have implemented that in their companies and with great success, 32 32 hour, 4 day work week. So those, you know, those types of You know, the, uh, right, that’s that capitalizing on those types of those claims, promises. You know, that’s when people start to see that the technology really does work for everyone. Well, that’s right, and that’s how you get and that’s an egalitarian that’s right. And that’s how you get people to use it in a smart and creative way. You get them motivated to use it in a way that that is beneficial. If you instead say to them, yeah, you’re gonna work twice as hard now because I expect you to using these tools, that’s where you get people not. Using them well, perhaps using them to, you know, uh, you know, plagiarize and, you know, create a, you know, create reports based on fictital fictitious studies and all that stuff, you know what I mean? So I feel like the best behavior with AI is going to be made possible by, by what you’re describing there, Tony. And I, I, I think taking some of the, the, the potential bad outcomes to an extreme. I, I think that’s what leads to the marginalization of large swaths of our population who then look to a person or a technology to lead them to, to that promises them retribution. You know, you’ve been, you’ve been wronged by I’ll, I’ll be generous and put it in the tech now you’ve been wronged by the technology. Over these years, and I will write that. I, I will give you, I will give you your voice back. I hear your grievance and retribution is coming when, when I’m in power. I mean, I, I think that I, I don’t, I don’t think that’s such a, such a far stretch from, you know, the sort of the disenfranchisement and, and, and frustration that. You know, we see for, for other reasons now. I think technology could lead us to, to that, to a, to a continued. Frustrated population. Let, let’s go to the uh the individual on the individual side. Restraint, restraint. Let, let’s, I want to leave folks with things that they can think about and, and either doing or think about doing for themselves to, to break us free of everything we just spent, you know, 55 minutes talking about. Right. Well, one thing I, I, I feel I always want to sort of say before offering advice on on how one can change their behavior as an individual is that I don’t think it’s up to you, you individual to Uh, push back against this tide. I do think it’s a tide, and I think that some forces much larger than us are gonna have to go to work on this problem, uh, for, um, some balance to come out on this. I’m a big fan of, of some of the, uh, you know, I, I think lawyers go a long way in in making change in this country. The reason that you and I are not smoking cigarettes. Uh you know, in this conversation and that we drive a car with an airbag system right there a seatbelt, yeah, that’s go back to the 70s seatbelts. Yeah, so, so I’m a big fan of the American liability regime for that reason, and I think some stuff is coming to help uh with this, with these things that are gonna be helpful. But in the meantime, I think that first of all, from a just from a personal perspective. Keep getting this technology to explain its limitations to you. I think any prompt you put in there that says, explain to me what you can and can’t do is a very helpful way of just reminding yourself, oh, this thing is just. Mimicking language. This is not a guru. This is not an expert. This is just a parrot, a really good parrot, right? That to me is a really important just sort of refresher. You can even set some of these LLMs to remind you of that stuff, right? It’ll ask you, you know, well, what kind of personality would you like me to be? And you can, you can make it as smooth and as fun to play with to talk to as you want to, but I would argue better to make it. To, to have it keep reminding you about what it is and what it isn’t, you know, make it not as much fun to sit with that thing. And as a result, You know, make it, you know, you can even use it to tell you, OK, that’s enough for a little while. I think you need to build an hour into your day where you’re literally doing nothing, because this is the other thing that we’re, you know, that we were already in this situation with smartphones, but we need to get back to a world in which you are preserving a little chunk of your day in which absolutely nothing is going on, to just get your brain the chance to to get back to its normal state. You know, for my, for my money, I really like, for instance, going outside, not just to get the sun on you but also so that your eyes have to see something that’s more than 30 ft from you. If you can get your eyes to focus on a distant horizon object, as a, as a former New Yorker, this was always the challenge. Can you find an avenue where you can look at something that’s more than 30 look down a street, yeah, you need an avenue rather than rather than a street, um, you know, the, the. The protecting of your brain’s, uh, calm creative space, driving without any uh stimulation other than what’s in front of you in the wheel. That’s how you’re gonna get your brain back to a sort of a, a, a healthier place. And then the last thing I would just say is, and this is true in social media too, I do a lot of work um speaking to to educators and school groups and so forth and and uh my I helped, I was part of a group that pioneered some. Pretty restrictive digital rules in our schools, uh, here in Oakland. But you know, one of the things, one of the lessons is, use it to go get what you need. And then when it brings it back to you, turn it off. So don’t, you know, when it brings the research back to you. Read that research. Don’t just let it then summarize that research for you and keep going, right? Um, the, the system is going to be is going to constantly ask you, what else can I do for you? What else, what, what next? What next, right? Don’t fall into that trap. Instead, you got to turn away from it, right? So that it is not the intellectual equivalent of the passive feed which was social media, right? Social media changed what was once a you go and get what you’re looking for model. Into a just sit here and swipe and we’ll take care of the rest kind of model and so using it to go get a thing or or you know fetch you what you need and then turning away from it I think is is as close to a mentally healthy interaction with the system as you can as you can uh do at the moment. Um, I don’t claim to have the answers to this because this is like I say, this is the perfect. Uh, hack for our brains, I think. And so the idea that human beings have to be somehow responsible for this, it reminds me like I’m a former drinker. I don’t drink anymore, and, uh, and you know when the when the liquor ads say drink responsibly, it makes me crazy because there’s no such thing for me, right? And I think that that we’re gonna find that in many areas of cognition and interaction there’s no such thing as using AI responsibly, but for the moment, you gotta start trying to make up those rules for yourself and those are a couple that I follow. Well, you and I could talk about this over a cup cup of coffee and tea. Uh, you can drink instead of a bar. I love to watch other people be drink. I just can’t go to the bar. That’s right. All right, Jacob Ward, veteran journalist. You’ll find him at by Jacob Ward in all the social networks. Uh, the book is, uh, the loop how AI is Creating a World Without Choices and how to fight back. Jacob, thanks very much for sharing your, your research, your thinking, vibrant conversation. Thanks so much, Tony. I really appreciate you being here. I’ll just shameless plug. I run a um a newsletter called the Rip Current at the ripcurrent.com. If anyone wants to hear me rant like this on a regular basis, that’s, that’s where we’re at. So thank you so much, Tony, for this time. I really appreciate you. My pleasure. Thank you. Next week That’s a very good question. What’s certain, it’ll be our last show of 2025. Talk about lackluster host, can’t even come up with a show for the next following week. It’s unbelievable. Horrible. If you missed any part of this week’s show, I beseech you. Find it at Tony Martignetti.com. Tragic actually is what it is, tragic, tragic. But your, but your intro today was nice and, uh, I heard like the echo. Cuz without the mic, you don’t have the uh. How is it called like the sound. You know how you’re a really good mic, it takes away like all the extra sound out here. Yeah, the ambient, the ambient noise. Yes. Well, when you went to do your intro today, I heard all of it. Right. Right. So what does that have to do with not having knowing what show is gonna be next week? I don’t know. I had a I had a point, so, we, we gotta get you on a plane. That’s the problem. You never, you never have done air travels. You, you’re confused. All right. Our creative producer is Claire Meyerhoff. I’m your associate producer Kate Martignetti. The show social media is by Susan Chavez. Mark Silverman is our web guy, and this music is by Scott Stein. Thank you for that affirmation, Scotty. Be with us next week for nonprofit radio, big nonprofit ideas for the other 95%. Go out and be great.
Jackie Shaw: Bookkeeping Red Flags & Your Board’s Oversight
Jackie Shaw reveals the biggest financial red flags most nonprofits overlook, including proper controls; reconciliation; getting receipts; your chart of accounts; and more. She also shares how to keep your board fully informed, without overwhelming them. Finally, she’s got an admonition about QuickBooks Online. Jackie is co-founder of Brass Jacks.
We’re the #1 Podcast for Nonprofits, With 13,000+ Weekly Listeners
Board relations. Fundraising. Volunteer management. Prospect research. Legal compliance. Accounting. Finance. Investments. Donor relations. Public relations. Marketing. Technology. Social media.
Every nonprofit struggles with these issues. Big nonprofits hire experts. The other 95% listen to Tony Martignetti Nonprofit Radio. Trusted experts and leading thinkers join me each week to tackle the tough issues. If you have big dreams but a small budget, you have a home at Tony Martignetti Nonprofit Radio. View Full Transcript
Welcome to Tony Martignetti Nonprofit Radio, big nonprofit ideas for the other 95%. I’m your aptly named host and the podfather of your favorite hebdominal podcast. Oh, I’m glad you’re with us. I’d be hit with a purophobia if you told me that forever after and for eternity, you’d miss this week’s show. Here’s our associate producer Kate with what’s coming. Hey Tony, we’ve got Bookkeeping, red flags, and your boards oversight. Jackie Shaw reveals the biggest financial red flags most nonprofits overlook, including proper controls, reconciliation, getting receipts, your chart of accounts, and more. She also shares how to keep your board fully informed without overwhelming them. Finally, she’s gotten admonition about QuickBooks online. Jackie is co-founder of Brass Jack’s. On Tony’s take too. I hope you enjoyed your Thanksgiving. Here is bookkeeping, red flags and your boards oversight. It’s a genuine pleasure to welcome Jackie Shaw to nonprofit radio. She and her longtime friend and colleague, also named Jackie, founded Brass Jack’s in 2022 with the mission to educate people to become highly skilled bookkeepers and to connect nonprofits to well-trained bookkeepers. The pair of jacks, as I, I call them pair of jacks. The pair of jacks published the bookkeeper’s survival guide in 2024. You’ll find the company at brass jacks.com. So I figured I was safe for calling them the pair of jacks. They, they call the company Brass jacks. I think call them safe pair of jacks. You’ll find the company at brassjacks.com. And Jackie Shaw on LinkedIn. Welcome to nonprofit radio, Jackie Shaw. Thank you so much for having me, Tony. It’s a genuine pleasure. I, I got a shout out. Uh, now, most people are gonna be listening, they might see a short reel, but you have a lot of color all about you. Uh, your, your sweater, your necklace, your lipstick, there’s a lot of color involved. Red, red top, uh, uh, green sweater, red neck, red lipstick. Uh, bold, like brown and gray glasses. You got a lot of color going on. I am an artist that day jobs as an accounting professional. OK. Do you have do you have a degree in art? I actually um have a degree combining um math and art, and so I did a math-based art exhibit, and then I studied Fibonacci for the math department. All right, all right, so the Fibonacci series. I, I’ve just don’t, all I remember is the phrase Fibonacci series. What, what is what is the Fibonacci series? Well, it’s so fascinating. Originally, um, it was, oh, and your fingernails, you just touch your, your fingernails are all yellow, blue, red. What do I see there? Oh my gosh, it’s unbelievable. Oh, yellow, blue, red? Yes, all right. They need a little upkeep. It’s been a, it’s been a minute since I most people are gonna listen to the audio. That’s OK, but I wanted to shout more I just saw. So, um. You had asked me a question before we did the Fibonacci series. Originally that um series was created to explain the breeding of rabbits in an enclosed environment. How many rabbits will you end up with if there are no predators? And once Fibonacci created the series for that, because there wasn’t TV back then, all the other mat mathematicians started playing with the sequence, and they discovered it explains so much going on in nature. You know, the, the spiral created by our cosmos, um, you waves, the shape of waves, the way, the way, um, stems grow on a plant, so that each one of them has enough sunlight. It just, it just absolutely exploded, um, and it’s become, you know, a foundation mathematical concept ever since. Cool. Uh, being Tony Martignetti, I love that it was founded by created by an Italian Fibonacci. What was his first name? Do you know his first name? I don’t remember his first name. OK, I’m sure it was something very Enrico, that’s right, um. Oh, and then so you you did an art installation based on mathematics. So was it uh a physical representation of some equation or formula or something like that? Yeah, one of the pieces filled the entire gallery wall, the longest part of the wall, and it compared the counting numbers versus the Fibonacci sequence. Um, and then I did a lot of other pieces that were in glass and things like that that had a mathematical component. What was fascinating is my exhibit. Sold out. there was very few pieces remaining, um, and a lot of people that are scared of math were drawn to the art. Yeah, right. The, uh, it’s a, well, it’s a physical representation. If I can’t understand the um If I can’t understand the mathematics behind it, at least I can, this is, this helps me understand what, what it represents, I guess, or something like that. It’s a physical representation of numbers that are beyond me. Yeah, and I think as humans, we’re drawn to those the math in visual, right? visual representations of math. We’re actually just drawn to that naturally. The fear of mathematics, which leads into the fear of bookkeeping. And segues nicely into our meeting today. The, um, the fear of mathematics, that gets instilled in, in school where people are told that they’re not, you know, it worked, it worked, it worked for me. I struggled. I did take some, uh, advanced mathematics. I got as far as calculus, but, but the, uh, the stigma around math, yeah, I, I, I, I struggled with it, and I don’t think I needed to struggle as badly as I did, but I think it goes back to Mrs. Gaffney, my, my 7th grade, uh, teacher. She was a teacher. I still remember, I’m 63 years old. I still remember this moment, 7th grade, you know, we were confident, uh, learning, learn the concept of infinite numbers, infinity, and she asked the question. The, the, the number of grains of sand on the beach, finite or infinite. I shot my hand up. I was positive I knew it. Infinite wrong. I was crushed, but it’s practically infinite. Nobody’s gonna measure and then how do you define dirt versus sand? who’s gonna come up with that explanation? So it’s, so in practical effect that it is infinite. So I think I was right. Mrs. Gaffney could at least give me part credit for answering the question half right. It, it’s, it’s practically infinite. Exactly, cause more sand getting created every day and washing up on the beaches, you know, that’s true too. What snapshot of time are we gonna, at what second are we gonna measure the and then the next, by the time you, you can’t count in and by the time the next wave comes up and deposits and withdraws sand and certainly not in equal amounts, you’re exactly right. Thank you very much, Jackie Shaw. So, so Mrs. Gaffney, she, she, but she hurt me, so I was so embarrassed that I got that wrong. I was like, oh. But it’s a practical effect. Nobody’s all right. I was thinking, you know, if you did, if you did an art piece on imaginary numbers, you could just have a frame that’s empty inside. And then you could sell it for like $7500. No, it’s just, it’s, it’s, it’s the imaginary numbers. And maybe it would get bought up by people later and it would end up being like the duct tape banana, and somebody in the future would get like sell my artwork for like $8 million. Billions, you’d be sold at Christie’s after you’d probably have to wait till after you die though to get that kind of notoriety. Uh, it seems, it seems it works that way for a lot of, for a lot of people, not for some, like boxy, but for a lot of people, uh, they, yeah, right. Oh, interesting. Mathematics, art, uh, let’s bring them together as you did so elegantly a few minutes ago and talk about bookkeeping and financial awareness for the boards and things like that. Um, you have some Financial red flags. That you would like nonprofits to be aware of. So let’s talk about some, let’s talk about some, some of those. Yeah. Another, I have to give uh kudos to this quote. It goes to Leslie Scheer, who’s also a nationally recognized accounting professional. And, um, she says the business owners must not abdicate their books but delegate. This is very true in the nonprofit world. So often people just abdicate the bookkeeping. They just like hand it off to somebody and where it gets really dangerous is if they’re handing it off to an executive director, especially I feel like if that executive director is not a founding director, you know, a lot of times when nonprofits are founded, the executive director is the person that came up with the idea, right? But at some point. They transition to maybe being a board member or retire and then we’re hiring EDs they’re, they’re now employee EDs and I think that you know all call outs to the EDs and all the hard work they do, but they’re not invested like the founder is. And so that’s when the board really needs to take control over the financials. And because we have so much numeracy in our country in the world, and people don’t really understand numbers or math, yes, because a lot of people had Mrs. Gaffney in 7th grade. Exactly, yeah, and so then the, it, it just gets tossed off to somebody. And nobody’s really paying attention to the, to the details of what’s going on and you know, we see it in the news every day that nonprofits that have embezzlement, nonprofits that suddenly realized we had an issue here with a local school. Bookkeeping was done incorrectly. They didn’t notice it until they were. Hundreds of thousands of dollars in the hole, and they were gonna have to lay off like 20 employees and do the stopgap measures cause nobody, nobody bothered to, um, we can trust, but we also have to validate. Nobody was validating that the information the board was seeing was accurate. OK. OK. So, Uh, let’s distinguish, uh, I ask my naive questions. Let’s distinguish first before we get to the red flags. You, you referred to bookkeeping, but what’s the difference between bookkeeping and accounting? Great question. Bookkeeping is the mechanism of creating the data, right? Um, the person that’s, that’s adding all the information to your accounting system and ideally should be doing things like reconciling. Accounting is the broader, bigger scope of things, right? It’s, it’s, it’s the accounting department that has a bookkeeper as one of the employees, um, and so accounting is the, is the, is the bigger picture, um, so bookkeeping is inside of accounting. OK, OK, and you said a bookkeeper would reconcile. We gotta, you gotta be careful of jargon jail. We have Jargon Jail on nonprofit radio. Uh, I’ve heard the word reconciling, but I don’t know what, what do you, what are, what are we reconciling? The, the, the progressives versus the conservatives? What are, what are, what’s being reconciled? The Reds versus the Greens. So the goal is reconciling any accounts that are on the statement of financial position, also known as the balance sheet. We need uh bank accounts, savings accounts, credit. Card accounts. Basically any account that we can get a statement for third party proof of the balance, we want to reconcile those accounts. A lot of them should be done monthly. Sometimes it’s OK to do something quarterly and boy oh boy do we have to make sure everything is dialed in at the end of the year before a 990s created. OK. Um, the, the, the activity of reconciling is a two-part system, and what I’m finding now in the world is, number one, there’s a lot of bookkeepers out there, and yeah, I just did air quotes, and y’all can’t see me do air quotes. So there’s a lot of people that are put in the bookkeeping chair. But they’re not bookkeepers. They’re more like data entry clerks, so they know how to clickety click the software. They don’t really understand the repercussions of what they’re doing, right? Like what, how the data that’s, that’s going to be created as a result. OK. What’s the other thing you’re seeing around bookkeeping? So, so number one in reconciling is you have to actually do it. And a lot of bookkeepers, people that are doing bookkeeping nowadays, don’t even know you’re supposed to reconcile. Cause they don’t have any training. So, you know, I just worked with a nonprofit and their books had not been reconciled since 2020. Oh my. And they haven’t checked their bank statements and checking accounts and for 5 years. They’ve been clicking and putting data in but they haven’t confirmed. So the reconciliation process confirms the, are the transactions in the system and only in the system once. And the second part of reconciling, so the first part is comparing your records against the third party documentation like statement and saying click click, click, click, yeah, I have all these things. But part two of the process which 90% of bookkeepers don’t know to do unless they’ve been trained and honestly, a lot of the bookkeepers we’re training are telling us they’re not learning this stuff. When they’re getting a bookkeeping degrees at colleges. And so the second part of reconciling, my friends, is you have to look at what’s not clearing, what’s not on those third party statements, but is in. Your accounting software and figure out what it is and why it’s there and you have to deal with it because it could be it’s a duplicate. What I think happened with this local school where they ended up in this huge cash flow shortfall and they had to lay off a bunch of people. I think that their income was getting double booked. And no one noticed. And the person that was doing the bookkeeping either wasn’t reconciling at all, or when they reconciled, they just clicked off the things that were on the statement and left behind all this old garbage that was not accurate because it wasn’t on the statement. OK, so, so they had twice as much, they thought they had twice as much income or revenue as they actually had. All right, all right. Uh, that’s as far as, well, let’s not go any deeper on that. OK, OK, but no, I can understand. So if I can understand it, certainly our listeners got. OK, those are the two things you gotta reconcile and then re reconciliation has two parts to it. You gotta actually enter the data and then you have to verify it against, you’re saying like basically reality like what history and reality. OK. So that sounds like one of our financial red flags. Like you’re not, you’re not reconciling, your bookkeeper isn’t properly reconciling. OK. Can we go to another financial red flag? Oh well, what I wanna do is tell the audience the takeaway of this one, what they can do about it because I don’t want to scare the bejeebers out of your audience and then have them just like running around like, I don’t even know what to do now. So, um. To take care of this, what a board member needs to get from the person doing the bookkeeping every month, and I want a board member to get it, not the ED but a board member, is something that’s called the reconciliation report. It shows the result of the person reconciling. So number one, you’re gonna be able to prove they did that step because you’ve got the report. And number 2, the board member can look at all the uncleared activity on the report and see what’s hanging out old and so they can hire someone else to step in if the person doing bookkeeping doesn’t have the skill set or knowledge. To deal with the ick. Give, give, give us an example of an uncleared item. Maybe if we ground it in an example. Yeah, um, a great example is this. People are processing payroll and QuickBooks online. So QuickBooks online payroll is creating paychecks. And then they turn on the bank feed in QuickBooks online. That bank feed can cause more trouble than it’s worth, but everybody thinks that they’re supposed to be using it nowadays because of the marketing and, and the pop-ups and the software. So the bank feed, the checking account has all the paychecks listed. And so, the data entry clerk, not realizing what they’re doing, adds the paychecks from the bank feed. Now I have 2 paychecks for every single employee. I see. OK. All right. All right. Um, are, are there more, well, before we get to more red flags, I’m sure I bet you have a bunch of red flags. Should I, should every Well, we should either, we should have a bookkeeper or, or a CFO like is, is this, can a CFO do the in a small nonprofit? Can the CFO do the bookkeeping function or no that you’re paying that person too much to do uh a more uh lower level job? Yeah, um, what I would say is that we need a data entry clerk. We need someone entering the data. And then we need somebody that’s either a bookkeeper on steroids or like a controller level person. That oversees and ensures accuracy. That’s the ideal scenario, and I know a lot of the little nonprofits like it should not be the same person, right, that’s like basic financial controls, I guess, yeah, because the person could be helping or helping, you know, whatever, a vendor and they’re and they’re changing the bookkeeping to make it look legitimate or All right, we have two pairs of eyes on these, on the, on the books, right? We’re talking about the books. And we should have it for everything, you know, in the for-profit world, it often lands on the owner’s lap, and the owner might not really have the skill set or knowledge to be the overseer, the controller watcher person. Um, but in the nonprofit world, we really, you know, I, I know that budgets are tight, but, you know, better to have two part-time people. Then to have one full-time person that doesn’t really know what they’re doing. Well, you could have somebody who knows what they’re doing, but still only have like if you just have a CFO. What about a board member overseeing the The, the work of the CFO, would that, would, would that person catch malfeasance? Ones, let’s just say or one of the, one of the trainings that that we do at Brass Jack’s is training treasurers, what they should really be looking at, you know, a lot of treasurers are very passive and they just get this report put in their lap from the person doing the bookkeeping. Yeah. And they just say, you know, we have $50,000 in the bank. And you know, they’re not even really presenting the financials, but they don’t know how. They don’t know how to proceed. That’s the way the company name Brass brass tacks, it’s like brass balls, you know, it’s it’s a good name. It’s a good name. Um, all right, financial red flags. So let’s let’s continue with um. Yeah, I’m sorry. Wait, what did you say about brass jacks? Oh, luckily no one else had taken it. I was worried it was gonna be like the, the Futurama where every, every name we pick, we go to look in someone else. Yeah, it’s not to say you could be brass jacks too, but it’s not quite the same, you know, a pair of jacks. You could have done jacks, but jacks is not as good as brass jacks. So like, um, all right, red flags, financial red flags are like oversight. We don’t have adequate financial oversight. Help us, help us diagnose problems we may have that we’re not aware of. Yeah. So the number one red flag is there’s only one person that has access to your bookkeeping information. That’s a huge one. You need more than one person to have access, but then the other people that have access need to be trained on what to look for, right? And what, what they should be going after. Um, another red flag is the financials change, especially in the nonprofit world. When when the board votes on those financial statements, that’s it. Those numbers have got to stay exactly like that. And so let’s say at the end uh for the close of June, we have a board meeting and it says that the, the net profit, the remaining, remaining money after income is $20,000. But then the next time we get the financials. That June number has changed, and it’s now $10,000. Well, the board voted on the financial packet, it should not have changed at all. And so one red flag and one thing that the board should look at is. To get out your statement of financial position, that balance sheet, and the board should always receive the prior month versus the current month so they can go down the prior month column and say does it match last month’s current month, you know, are all the numbers still the same? And if they’re not, they really got to get on that because one. Because the board voted in the financials, they should not change, but the second piece of this is numbers changing after the fact either means that the person doing the bookkeeping doesn’t fully know what they’re doing. Or they’re not getting the information they need to do it right, like the executive director isn’t turning in receipts. Another red flag we gotta talk about, um, or, um, they They don’t understand the importance of not changing the past. So the board really needs to like do a smackdown and say, hey, you know, June changed, you got to change it back, right? Or, or why did it? Yeah, what’s going on? Right? All right, all right. That’s, that sounds, but uh I’ll bet there are a lot a lot of boards that are not, not doing that. They may be looking back, I bet you $1 each. How many people do you watching this show? I bet you 10 cents each that when you go to look at your financials, they probably have changed. OK. Well, don’t be so giddy about it. Well, she’s laughing at us. I mean, you know, that’s not supposed to take joy in this. That’s, that’s a pain point. Don’t you know it’s either laugh or cry, and if you see the disasters I’ve seen and the heartbreak I’ve seen. I would either be in a puddle crying right now or I have to just laugh. All right, plus you’re in the position of having to explain what the problem is and why it matters. All right, so what’s the, you know, like, well, numbers always change, you know, things changed from, from October to November. Yeah, the, the situation changed. What’s the big deal? Yeah. It’s, it’s that, it’s that October changed. It’s OK for November to change. That’s the current month that the person’s handling. Going back and changing September and October, that’s the problem. Because it, it gets very easy to do embezzlement and hide things. It’s a shell game. They’re constantly moving the embezzlement activity to past periods, hoping nobody sees it. Well then should we be looking at 3 months, uh, should look at September, October and November? Hey, in one report? Good question that exists in one report. It’s the statement of financial position. And you can look at the net profit showing in equity. I know I’m throwing out accounting terms right now, but the statement of financial position has the total profit for year for the year. So if you take that number and you subtract the current month’s profit, it should equal the last report. Yeah, I, I got that. OK, it should equal last month. All right. All right. Well, what do we do if we have somebody who’s just. Cheating on the number. Well, that’s why you have the second set of eyes. I mean, you could just put anything in the report to the board. You could say that the numbers didn’t change, but they could have actually changed. That’s why you need the, you need somebody overlooking the creation of the. Statement of financial position that was great. I mean how did we get to these numbers? That, that’s not that, that ideally doesn’t sound like it shouldn’t be a board member. That should be somebody internal overlooking. The creation of the statement for the board. Yeah, the problem, and I, you know, I’ve been on a lot of boards and I’ve been the treasurer most of the time. Oh yeah. And usually people bring me on board to actually teach the other board members how to read the financials. Cause a lot of board members don’t know how. Yeah. And so there’s that piece of it. But then there’s also the idea that we have new treasurers every 2 to 4 years. And so if we say the treasurer is in charge of this, then we need some sort of treasure on boarding, like almost like video. Showing someone, this is the report, these are the things to look at. Here’s the math, like a tutorial stepping them through each step of the way. So if you have someone take over as treasurer that isn’t an accountant. That they could follow the system. OK. Yeah, alright, alright, because, yeah, because I could see in the transition could be, uh, place where mistakes instead, I won’t go to the nefarious, you know, the, the, the bad actors. I won’t go there every time. That’s where the mistakes could crop up. The new treasure is just not catching the difference between the way things were and the way they are now, or you know. Something changed in the process or the, you know, so they need to have overlap as you’re saying some, some transition time between treasurers if they’re doing your oversight properly. All right. Uh, you mentioned turning in receipts, not, not turning in receipts, another red flag. I spent 2, I spent 25 bucks on lunch with the, with the prospect. That’s a pretty cheap lunch. Uh, I spent $75 on lunch with the, with my donor, with our, with our donor meeting the foundation contact. Just put it down, just put it down, 75. That’s bad, right, that’s bad. Yeah. Again, that’s where the bank feed really gets nonprofits because somebody will turn on the bank feed and the software, all the transactions from the credit card are being fed in and someone’s just blindly clicking and going, Oh, you’re supply, you’re this, you’re that, without the receipt. Well, you know, there’s definitely instances where You know, and I, you know, like, let’s, let’s pretend I take over as, as treasurer for a company, and I start asking them for all this stuff that they a nonprofit, be treasurer of a nonprofit. So let’s say I’m coming on board as a treasurer for a nonprofit. I start asking the bookkeeper things that no one else has ever asked them before. And as I do, I discovered that the credit card hasn’t been reconciled for 3 months. And I say, hey, bookkeeper, what is going on? This has to be done every month. And they say, well, the ED hasn’t turned in their receipts. Well, and this is something that I’ve seen happen in real life many times. So, the ED is actually causing the financials that are going to the board to be inaccurate. Because they’re withholding those records. And then the question is, why are they withholding the records? Is it just that they’re very disorganized and can’t manage to keep track of their receipts? Or are they hiding something? That’s where it just gets so tricky so quickly in the bookkeeping world. And it’s not just the ED. I mean, everybody should be turning in receipts, right? For whatever expenses, well, it was, it was gas for the, it was gas for the outreach van, uh, it was dinner with a prospect, you know, whatever, right? OK. And then should we just be marking like, is it OK to just mark in the, in the corner, dinner with Jackie Shaw, you know, renewing. Her $750,000 gift, uh, this month, we’ll, we’ll put you down for $750 monthly. You’re a sustainer at the $750,000 level. Yeah, I mean, we may as well, if we’re gonna have hypotheticals, we may have some fun. So every month, uh, you know, you give us $750,000. I feel like I should take you to the lunch or dinner at least a couple times a year. Um, so is that OK? Just a little just a little. Lunch reads, uh, with Jackie Shaw re gift renewal, boom hand that over. And then at the end of the week, is that OK? just the end of the week I can give my receipts over to the, to the bookkeeper. All right. And then they should be checking the against the, the credit card statement. That’s reconciliation, right? Exactly. OK. OK. Uh, it didn’t come, wait, uh, it’s, it’s uh $12 short. The, the, the bank is $12 more than the receipt. I paid the tip in cash. Oh, all right, $12 tip in cash. You didn’t note that on the receipt. Try to be better about that. If you’re gonna pay cash for receipts, which is admirable, so the, the person gets 100% maybe, uh, you know, you got to note that down. $12 cash tip. All right, we’re on you. It’s time for Tony’s take too. Thank you, Kate. Unbelievable. Last week’s show was the Thanksgiving Week show. We publish a show every single Monday, every single 50 times a year. Thanksgiving last week, did you, did you hear all the mentions of Thanksgiving and I hope you have a happy Thanksgiving. I hope you enjoy your time with friends and family. No, no, you didn’t, all of them? You didn’t hear a single one. You know, you suffer with a lackluster middling host. At best, at his best, lackluster and middling on good weeks. I just didn’t think of it. And I have an associate producer too. But I know, I always said, I wish I had an intern, so I had somebody to blame. Now I don’t have an intern, we have, I have an associate producer, but it’s hard for me to blame her. Uh, you know, I just, I didn’t think of it. I, I’m thinking of the show, I’m thinking of, you know, what to say about the guest and so. Middling and lackluster, that’s that’s the best excuse I can come up with. I do hope you enjoyed the past tense, your Thanksgiving. Hope you were with family or friends and. I hope you took some time for yourself too. This is essential. This is essential. You uh. You’re working in a high stress time for our nonprofit community. So I do hope you took some time for yourself, because now it’s the uh hectic 4th quarter. 25, 30% of your revenue could come in the next 6 weeks. So Be good to yourself, I hope you were over your Thanksgiving. And uh I hope I remember to say happy Thanksgiving. Next year. That is Tony’s take too. Associate producer Kate? I think to make up for the lack last week, we should say what we are thankful for. This week. Oh, OK, all right, I’m game for that. I’m thankful for. Uh, family, um, certainly I’ll be seeing my wife, uh, over Thanksgiving cause we don’t live together. You know that, but a lot of listeners might not know that. She lives in Indiana. I live on a beach in North Carolina. And I would say for uh just. This life that I’ve created with my where I live. My business, the clients that I have, the friends that I have. Yeah, you know, you, I’ve, I, I, I, I love and I’m thankful for the, the life that I have created. Mhm. How about you? Um, I am thankful for family. Family always comes first. Um, I am thankful for my two pets who are watching me right now, and I am definitely thankful for, um, my education. I am very happy with where I’m going, um, back to school and university. I’m always happy to go every other day I think I have because I’m hybrid, um, yeah, so I’m thankful for. You’re studying, you want to be a teacher. Mhm. All right. I hope we, uh, I hope we do this uh on time uh next year. Do we want to say Merry Christmas early or maybe next week? Well, first, doesn’t celebrate, but we can say. Yes, uh, in, uh, in case we, well, we’re off for 2 weeks. We’re off for the 2 weeks around uh around Christmas anyway, Christmas and New Year’s. So maybe that’s a good idea since I might forget. I think usually the last show of the year I don’t forget, but it’s probably, it’s still a good idea, so thank you. We’ve got booku but loads more time. Here’s the rest of bookkeeping, red flags, and your boards oversight with Jackie Shaw. Other red flags. Let’s have some fun. What what other red flags we got? A wonderful red flag is that the financial statements are like 8 pages long. So there’s this other financial statement called the statement of financial activity. That’s what’s also called a profit and loss in the for-profit world or income statement. It shows all the grant and donation income you’re getting in, all your current year expenses, and what money is left over, if any. The longer that report is. The more likely the bookkeeping is not gonna be done correctly because when you have too many choices, people are gonna put this is expense A. OK, so it’s the, it’s the meal with me as a donor. OK. One time they’re gonna put it into outreach expense and the next time they’re gonna put it in. Mileage meals and something else expense and so it’s not consistently going to the same bucket and consistency is one of the most important things that we want to implement in our bookkeeping systems. We want consistency month over month or year. Otherwise we can’t manage our expenses. If we’re, if we’re not defining expenses the same month after month, then how can we say these expenses are too high or we can afford to spend a little more over here. If we’re not measuring it the same, because we don’t know really what it is, right? And so, uh, you know, a, a nice looking statement for a nonprofit that this report should be 2 to 3 pages at the most. Because any more than that, it means you’ve got so many categories that the person doing the data entry probably will pick a different choice. And not be consistent because there’s just too many choices. And then for the, the board members, you can imagine, especially with the numeracy we have in our country, that the, they’re going to glaze over. The board members glaze over after the first couple pages and so no, then no one’s looking, no one’s paying attention, and no one’s asking the right questions. Yeah, it’s too long. We just, I can’t, I can’t deal with it. I’ll just assume everybody’s honest and accurate. That’s probably a bad assumption. That’s a, that’s a, uh, I don’t know if it’s a false assumption. It’s an unsafe. That’s a risky assumption. I’m sure everything’s fine. All right, you shouldn’t, shouldn’t be a board member. Uh, if, if, if you’re just sure everything is fine, I mean you’re not confirming that, you probably shouldn’t be on the board. Yeah, maybe just be a volunteer. Just be a volunteer or yeah, or donor with, with high hopes. Yeah, we need, we need, uh, we need people to take their responsibilities more seriously as fiduciaries than uh. It’s all fine. It’s all fine. You got more red flags for us? Um, the, so we’ve got the, the reconciling piece. We’ve got the fact that we need oversight, we’ve got the way too many choices, um, and then the other red flag for me is when a new treasurer is voted on the board. They want to change the entire accounting framework and what I mean by the accounting framework is the chart of accounts, that list we were just talking about that can be too long, you know, um, the, the way the data is being entered, and so, you know, you get some fairly strong-willed treasurers that want to change everything. And if you can imagine every 3 to 4 years. Everything changing. Imagine someone coming into your house every 3 to 4 years, and they move absolutely everything in your house to different areas of your house. Like, there’s no way you’re gonna be able to compare your year over year information. Or as a board, even feel like you’re confident in that you learned this system and you can look at the financials if every treasurer is gonna want to change everything. And so, as treasurers, we have to be really careful about coming in and like wanting to implement our idea of the way things should be. OK, that you’re talking about the overall organization of, of the accounts and the and the different buckets. OK. Yeah. Although if you see, if you come in and you’re, and you see that the, the, the list of accounts is like you were saying 7 or 8 pages, that sounds like a worthy, we got to consolidate these things. Mhm. And I sounds like a worthy overhaul. Absolutely. And there have been times where I have been brought in as treasurer specifically to do that activity. Now, I will say some of my CPA colleagues have told me, don’t do that. Only revise the systems as a paid contractor. They didn’t want me doing it as a volunteer for, for legal reasons or whatever, but there are reasons to have the chart of accounts and the systems revised, reviewed and revised, especially if we’re not getting the information the board needs to manage the company very well. Um, and so while there, there are times to do it, it has to be something where everybody’s on board with it. It’s not a surprise. Like the board, you know, the board says we don’t understand and they have somebody come in and say, I can fix this and I’m gonna do this, and then they’re like, OK, yes, do that, right? It has to be um all out in the open, not the new treasurer gets access to the QuickBooks file and just changes everything. OK, very good. The chart of accounts. Yeah. Keep it, keep it to a couple of pages and that, that even sounds like a lot. Like, I don’t your average small to mid-size nonprofit. I don’t know, page and a half, maybe 2 pages of accounts. Yeah. Otherwise you’re you’re subdividing too much and then the value gets lost because you’ve got these $6 accounts that that don’t you gotta try to figure out in your mind, well, how is that related to the, to the other accounts on the 7 or 8 pages. So that I can aggregate them in my head. No, that’s not, all right, I understand. All right. I understand it, that’s a good sign. That’s another red flag is that, so let’s say we have a data entry bookkeeper person that’s doing the clicks and adding the data to an accounting system, and we have the board of directors that no one on the board of directors might have of an accounting or bookkeeping background. And the board tells the the data entry person, we want this account, we want that account, and pretty soon your statement of financial activity doesn’t say telephone expense, it says Verizon, you know, and they start listing all, like instead of accounts explaining what was purchased, they start changing it into who we bought it from. OK, right. Well, that’s fine if it’s Verizon, but then if it’s like Joe’s mechanical, you know, is that, is that plumbing? Is it electrical? Is it HVAC? Is it carpentry? Well, we don’t know Joe’s, right, all right, all right. And then, you know, you find out that, uh, Joe is, uh, I’m married to the bookkeeper, that’s bad. That’s bad. All right, all right. Thank you for the red flags. OK, those are cool. Those are cool. Um, keeping boards, you’ve alluded to boards many times, keeping boards informed, that’s essential. That is that, is that the treasurer’s? Is that the board treasurer’s responsibility? The board treasurer in conjunction with the CFO? Who’s, who’s responsible for informing the CEO, who’s responsible for informing the board? And then we’ll get to what you should be informing them. Oh, but who’s responsible for this? So in my opinion, the treasurer, it’s a treasurer’s job to um Uh, present the financial statements to the board of directors. Um, it’s, I think that’s a good idea. I don’t think you should rely on your bookkeeper or your, you know, paid CFO to do it because, you know, they’re going to come in and they can point at the things they want you to look at and not point at the things they want you to ignore and guide the board into Not noticing issues, right? And so we want again that third party, part of the accounting controls, that third party person that doesn’t do the bookkeeping, the treasurer should be looking at the financials and looking at supplemental documents and then reporting to the board, the state. Of the organization. OK. And how do we report the state of the organization? What does the board need to know? Yeah, so we need that statement of financial activity and the statement of financial position. Um, so those two reports are important, but then it’s like how they’re formatted, you know, we can get into the weeds. Like I always get rid of the pennies, you know, I try to keep, put as few numbers on the page as possible by, by rounding and things like that, because there’s gonna be people on the board that are right brained people that, uh, uh, a white page with black numbers is not their jam. So, to help them with that, and it’s just a smart idea anyway, I like nonprofits to have a dashboard. You had mentioned that earlier. So, a dashboard, I want a dashboard that shows us what our open grants are. What we spent, how much there is left to spend, you know, the deadline to spend it, um, and so there’s, you know, every nonprofit, their dashboard might be a little different, but if you have grants, that’s a really important piece. And then, um, usually with the statement of financial activity report, we are often looking at that as a budget versus actual report. So we have a budget added to our accounting system and we’re always looking at budget versus actual. OK, and they should be, they should be aligned or maybe there’s an explanation for why they’re not. Mhm. Uh, the, the tree crashed and, uh, tore down the fence and, and the, the east wing. Oh, that’s a bad example. I don’t, uh, lamenting our east wing, uh, tore down, uh, whatever, a tree crashed into the pool, the outdoor pool, big expense. We gotta drain the pool, the heater got crushed. And plus we gotta get the tree out of there. Alright, so we didn’t budget, we didn’t budget in uh. I guess in uh facilities for tree falling. OK, that’s explained, but if we’re, but if if we’re not, but if this cons consistently disparities between our budget and our actual, we either spending recklessly or we’re not budgeting properly. Exactly, yep. OK. Well this is easier than, see, in college, I took accounting for poets. And I, I got a D, so you know, you can imagine, so you see where what you see what the foundation is that you’re working with. I didn’t teach the class, Tony stable, yeah, I know, I know, thank you. Not an A, you wouldn’t you give me an A. Mrs. Gaffney taught it. I’m, I’m still playing. 63 years, uh whatever, um. 557 years later, um, no, that was 7 years old. It was 7th grade. Well however old you are on 7th grade minus 63, that many number of years I’m still plagued by Mrs. Gaffney. She had that phony blonde hair too. It it just looked terrible. The, the, it was, it was, it was, it was very unbecoming. Infinite finite. Um, All right. What, what, what, what else goes on the dashboard? The, the board dashboard. grant you mentioned grants, grants, grants revenue, grants income spent, how long we have to spend it with deadlines. What what else goes on that board dashboard? I also like a really high level view of the budget. Like we said, we’d bring in this much in income. We’ve brought in that much of income. Um, I also like a dashboard that has some graphs. Like I’d like to see like a pie graph of our expenses, how much we’re spending on fundraising versus programs versus overhead kind of thing. So bringing in graphs for those right brain uh board members that really need to to see colors and shapes and not numbers. OK. OK. All very good. Colors are good. Um, all right, so that, all right. Anything else you wanna, you wanna share about? All this stuff about the, about the board specifically. Yeah, um, well, I will tell you a really interesting story. So I had a um an old love. Yeah. I have an old client that reached out and they said. We’re gonna move to QuickBooks Online from QuickBooks Desktop, cause QuickBooks Desktop went from $150 to $3000 skyrocketed. Why? Because we’re paying, we’re out of pocket paying for Intuit’s AI development and they’re lobbying to keep themselves in a good position. For example, they’re taking away the free file software that our government had so people could file their taxes for free. That’s being taken away this coming year because the current administration says the tech companies have it under control. Well, they do, but they’re gouging us. So sounds like what Microsoft did to nonprofits earlier this year, taking away our 400,000 free Microsoft 365 licenses for, for small nonprofits, and now, you know, and started charging a licensing fee. Yep, same problem here. So what happened is Bastards. So, the story is that there’s this company TechSoup, and TechSoup software to nonprofits, and you could always get QuickBooks Desktop through TechSoup. Well, they stopped, they stopped selling it. So now you can only get QuickBooks online. QuickBooks Online is not that smart of software. I’ve been using it for almost 20 years. If you want to ask anybody. Who’s the expert at QuickBooks Online right here I’m one of them. I’ve been, I’ve been using this software for years. I know it’s limitations, and it absolutely cannot handle a $7 or $12 million dollar nonprofit. It just can’t handle it. So the desktop, the desktop version, which now is, is 2,000% larger than it was, coster than it was, that’s the version. Well, if, if, if QuickBooks online is so inadequate, how come you’ve been using it for 20 years? Because people want to integrate with third party platforms and all the third-party platforms are being told by Intuit. They’re not allowed to update their desktop integration apps, which I, which should be illegal. You know, if another company shouldn’t be able to tell another company what they can do and what they can’t. So they’re, they’re telling all the third party companies that integrate. You’re not allowed to update your desktop, push everybody to QuickBooks online. And so it’s all about the marketing and the third party integrators getting pushed. Now, the story, my client, old client reaches out and they say, hey, we’re gonna move to QuickBooks Online, we think, because we need, we want to save money for bookkeeping, and we think this will save us money. Now, I understand you’re paying $3000 for software right now, and you think it’s really sexy to pay like $90 a year with the TechSoup subscription. The problem is that they’re trying to cut down on the time it takes for the bookkeeper to do the bookkeeping. That was their end game. It wasn’t so much the cost of the software, but their new treasurer thought that they would save a bunch of time in bookkeeping if they switched. So I very easily explained to them what a huge disaster this would be. And any money they think they’re gonna, they’re any, the savings between the two different software platforms like that 3000 dollars-ish, they’re gonna lose that in. The delays and the inadequacies of that software. So if you’re used to using QuickBooks online, you would be a very rare user if you didn’t sit and watch the blue donut of death spin. Cause it, and it’s not your, it’s not your internet, my friends. Intuit oversold QuickBooks online when they pushed everybody into QBO this they were the last year and now they don’t have the bandwidth. They don’t have the server farms, AKA now called data centers. They don’t have the data centers bandwidth to, to take care of all of us. So it’s just this constant, just lag time, lag time, lag time and the functionalities. Not there. The, the ultimate report for board members is a statement called Budget performance. It’s in QuickBooks desktop. It shows last month actuals, last month budget, year to date actuals, year to date budget, and then the annual budget all on one report. That’s like the jam. That’s the perfect report to give the board. It doesn’t exist in QuickBooks online. All right. All right, and an admonition. We’re gonna end with an admonition about QBO QuickBooks Online. Inadequate despite the very attractive price. If you’re profit that’s doing more than a million dollars, I would be real careful about using QuickBooks online. That’s the advice from Jackie Shaw. What, half of the pair of jacks? With her friend and co-founder. You’ll find the company at brassjacks.com, and you’ll find Jackie on LinkedIn. Thank you very much, Jackie. This is fun. This is a lot more fun than 7th grade mathematics. Yeah, hanging out with me and doing numbers is gonna be way more fun than that lady. This is Gaffney. This is Gaffney, come on. She’s probably long dead now. Her blonde hair is probably still very blonde in her in her casket. I, I hope she got cremated just so that the blonde hair died went out, went out, disappeared. All of the plant life around her coffin area is all gone because yeah, it’s contaminated. It’s contaminated by the by the bleaching product. Oh, it was bad. Thank you, Jackie Shaw. Thank you, Tony. Next week, overlooked consequences of AI. If you missed any part of this week’s show, I beseech you. Find it at Tony Martignetti.com. Our creative producer is Claire Meyerhoff. I’m your associate producer Kate Martignetti. The show’s social media is by Susan Chavez. Mark Silverman is our web guy, and this music is by Scott Stein. Thank you for that affirmation, Scotty. Be with us next week for nonprofit Radio, big nonprofit ideas for the other 95%. Go out and be great.
Keith Mestrich: Managing Money & Your Banking Relationship
Let’s talk about money, a topic people fear more than the dentist or death. And let’s talk about the place your nonprofit keeps its money—a bank. Keith Mestrich doesn’t fear talking about liquidity and cash management; reserves; lines of credit; debt; negotiating bank fees and interest; getting the most from your bank; CEO and board, money management KPIs; and more. He’s senior advisor at Crescent Cares.
We’re the #1 Podcast for Nonprofits, With 13,000+ Weekly Listeners
Board relations. Fundraising. Volunteer management. Prospect research. Legal compliance. Accounting. Finance. Investments. Donor relations. Public relations. Marketing. Technology. Social media.
Every nonprofit struggles with these issues. Big nonprofits hire experts. The other 95% listen to Tony Martignetti Nonprofit Radio. Trusted experts and leading thinkers join me each week to tackle the tough issues. If you have big dreams but a small budget, you have a home at Tony Martignetti Nonprofit Radio. View Full Transcript
Welcome to Tony Martignetti Nonprofit Radio, big nonprofit ideas for the other 95%. I’m your aptly named host, and I’m the podfather of your favorite hebdominal podcast. Oh, I’m glad you’re with us. I’d be thrown into uca Ariasis, if you wormed in with the idea that you missed this week’s show. Here’s our associate producer, Kate, with what’s up. Hey Tony, I’m on it. Managing money and your banking relationship. Let’s talk about money, a topic people fear more than the dentist or death. And let’s talk about the place your nonprofit keeps its money, a bank. Keith Mettrich doesn’t fear talking about liquidity and cash management, reserves, lines of credit, debt, negotiating bank fees and interest, getting the most from your bank, CEO and board, money management, KPIs, and more. He’s a senior advisor at Crescent Cares. On Tony’s take too. Remembering Sam’s studio. Here is managing money and your banking relationship. It’s my pleasure to welcome Keith Mesttrich to nonprofit Radio. Keith is senior advisor at Crescent Cares. He brings more than 30 years of experience leading financial institutions, including his tenure as president and CEO of Amalgamated Bank. The company is at Crescent carees.com. You’ll find Keith Mesttrich on LinkedIn. Keith, welcome to the show. Thanks, Tony. It’s good to be here. Pleasure to have you talking about financial management for nonprofits. Give us, um, give us a little lay of the land. The, the, the, uh, the banking industry. I, I don’t, I don’t think nonprofits are, especially small and mid-size nonprofits, our listeners are, um, first and foremost. In the, in the banking industry’s minds, is that, would you say that that’s uh probably accurate? I, I think that’s exactly right. Um, I think there’s a few reasons for that. I think there’s some misperception that they’re not as well run as, you know, for-profit businesses would be. I think that there’s some misperception that sometimes nonprofits might just have very low balances and might not be able to bring a lot of financial upside to, to a financial institution. Um, I think it is true that there are lots of nonprofits that don’t borrow money, um, as a general rule, um, and that’s how banks oftentimes make their money is, is, is lending to their clients. So I think there’s a predisposition to not go out and seek nonprofits as, as, as clients. I think there’s sometimes a sense that if you, if a, if a nonprofit goes to the bank, the, the nonprofit’s gonna ask that bank for a bunch of contributions and banks might want to try and avoid that. So I think, I think, I think you’re right. Um, and I, and because of that, it’s also, there’s not a lot of bankers that understand how the nonprofit industry works, and they haven’t either brought on bankers who are sensitive to the needs of those non-profit institutions, nor have they developed products and services that really meet the needs, um, that nonprofits need when it comes to their financials. All right, so if we’re walking to Bank of New York. Uh, we’re, we’re getting screwed. I mean, they really don’t care. I mean, I, I, I don’t think, you know, they’re just, there aren’t products and Services, I don’t think for, for small and mid-size nonprofits for all the reasons you, you know, all the reasons and sort of stereotypes that uh that you just laid out. All right. Um, so what are. You know, like All right, let’s, why don’t we start with some financial advice. All right, and then, and then I’d like to talk about, you know, if you, what if you are dissatisfied with your Bank of America relationship. I can’t, what’s some other huge banks that wouldn’t, that don’t really care about nonprofits besides, well, it’s an interesting thing. A lot of nonprofits, especially ones who have been around for a while, probably started out their banking relationship with the bank down the street. And then that bank might have been a local community bank that might have actually cared about having a relationship with a small or medium nonprofit because that was part of the fabric of their community. But then that bank got bought by some. Big regional player and then a big bank like Bank of America or Wells Fargo or Chase bought that big regional bank. And so now, now that nonprofit’s banking with some gigantic financial institution, um, that will say that they have a nonprofit, um, uh, uh, business model, but, but they really don’t. They certainly bank lots of nonprofits because as you know, Tony, there’s, you know, hundreds of thousands of nonprofits around the country, so they’re gonna meet at every bank, yeah. But, but you, you, you know, that local branch banker or that, that commercial banker has been, you know, tuned up to be able to think about how to bank, um, a small business or a manufacturing company or a local retailer, and they think about the financials of those organizations and, and, and think about how to provide services for those. They don’t really understand the things like how grants, you know, need to be managed or the cash flow of organizations that might raise their money, you know, in a uh a spring. In a, in a winter annual appeal and maybe have a granting cycle that comes in, but the cash flow is very choppy. Um, and so you really want to try and find a banker who understands that and will work with you to find a way to maybe have you have a line of credit that can help get you through those kinds of um, uh, difficult periods or, or can help you think about how to increasingly take technological tools sometimes that nonprofits aren’t as familiar with credit card processing and Managing um electronic payments and other things and really teach them how to do that and do it really efficiently. Takes a banker with I think, uh, a special affinity for the nonprofit world to be able to do that. And there are some out there that, that, that can, can offer that service. OK. And we’ll get a chance to, you know, you can talk about Crescent Cares as, as one of those that, that cares. Crescent, it’s it’s a name, Crescent must, you must care. You, you, you, it’s named Crescent Cares. Where you’re a senior adviser. All right, but before we go, before we go there, let’s, um, all right, we’re all getting screwed. uh, I’m, I’m putting it bluntly. It’s, uh, small and mid-size nonprofits. Let’s talk about some of your financial advice about, uh, liquidity, cash management, you know, yes, uneven income. Might be a lot of, um, it’s, I don’t think it’s uncommon like 50, 60s, 70% of fundraising revenue could all come in this fourth quarter that we’re, we’re in right now. Uh, and then the grant cycle as well. How do we Yeah, how do we like even things out? How do we make sure we can keep the lights on in uh in July when we’re not gonna have a big fundraising surge until, let’s say 4th quarter, you know, how do we, yeah, I think it’s, it’s a great question, and, and especially for smaller nonprofits, you really have to understand what your cash needs are, and I think that’s really important, um. We spend a lot of time thinking about budgets every year and how much we’re going to need to pay for personnel and how much we’re gonna need to pay for rent, and how much we’re gonna need to pay for utilities. And we know what that number is gonna look like on an, on an annual basis. But oftentimes I think what nonprofits don’t do is they don’t think about how much money do I need every month, um, or every pay period. And do I have enough cash on hand? And to be able to support myself, to, to pay my employees, to pay my landlord, to make sure that the, that the, that the lights stay on and, and then do all the programmatic work, um, etc. that needs to be done. So, really, that kind of cash flow projecting and getting good at that and having somebody on your team who can help you as an executive director or senior program manager. or something like that, really understand in January, I’m gonna need this much cash. I’ve got this much on hand. I’ve got this much that’s likely coming in, and I’ve got this much going out the door. And while it’s difficult to make 100% accurate predictions, it’s pretty easy to make pretty close ones. And I’m making sure that you know you’re gonna have enough cash in the organization. Um, is, is really important. And then, and then obviously having reserves so that if you run into, into time periods where those cash period, those, those cash projections don’t come in, you have some money you can draw on to be able to pay your basic bills. Yeah, we’ll get to reserves and endowment, um, but so in terms of making an educated guess about what your, what your cash needs are gonna be each, I guess, each month, um, I mean, it’s a matter of, you know, looking at, looking at the history, what was, what was last this time last year like and what are we anticipate seeing this year? I mean, is it that simple? Most nonprofits, the largest expense by far is uh employment costs. So the salaries and wages of your employees and then the benefits that come or the taxes that you’re responsible for, you know, your, your portion of Social Security, etc. Um, that’s, that’s a very, very noble fact and for many organizations, that’s gonna be 75, 80% of what their budgets actually look like. So just begin to plot that out, pay period by pay period or, or, or month by month. You know your rent. That’s an oftentimes another really, really big expense. Plot that out. You’ll know what that’s going to be. And then think about, right, um, um, for those other unanticipated expenses, do you have a higher utility bills in the winter? Do you have, uh, certain kinds of program that you run at a certain time of year that have programmatic expense? Try and plot those out on the calendar so that you’ll know when you actually need cash on hand. Um, and to the extent that you can look backwards and think about when money flows in. Either because you have a known grant um cycle that is going to come in or grant payments that have been pledged and, you know, where they’re going to come in, or when you run your annual or semiannual or quadri-annual um fundraising appeals, etc. You wanna be able to try to think about when is money actually coming in and doing that. And if you just think through those basics, right, you can get a pretty good sense of what your cash needs are going to be and, and will you have enough cash to cover your basic expenses. OK, if you’re coming up a little short, um, Or very short, even worse. Uh, before we get to reserves, uh, a credit line can be valuable. We had, we had, uh, Stephen Halaznik on last week or the week before, talking about, uh, the value of a credit line. But what, what’s your, what’s your advice around coming up short? All right, I know, I know we are not gonna, we are not gonna be able to um take a worst case like meet payroll, uh, next month, the way things look. Um, I think a credit line is a, is a great tool to be able to have. Um, uh, a lot of people are scared by having debt, um, properly managed, a good credit line can be a way to, to get through those ebbs and flows in your, in your, in your cash cycle or when that projected big check from a big donor just doesn’t materialize and, and, uh, that could be for lots of reasons, right? Um, that you, you have a way, way to get through it. One of my pieces of advice is the best time to get a credit line though is when you don’t need it, is to go to your bank and work with your bank or when. You’re, when your, when your financials are in pretty good shape. When you have enough cash on hand, and when you can say to the banker, I don’t need to draw this today, but I might in the, in the future because the banker is going to look at your financial health. And what you don’t want to be doing, uh, Tony’s trying to arrange for a line of credit when you’re at a point of distress and you really need it. So good planning, right? Good planning is to be able to go to your bank and be able to negotiate a line of credit for a couple of months of expenses to be able to do that. Now, it’ll cost you a little something. Usually a bank will charge about 1% of the maximum draw amount on a loan. Um, but I think that’s really worth it to have a financial peace of mind to be able to weather any kinds of, um, uh, financial stress that an organization might have. The best thing is you never actually have to use it. Worst cases, you’ve negotiated, you can do it, and then you can pay it back, um, and relieve yourself of that interest expense when you, when you have the ability to cover your expenses and pay back that loan again. It’s a smart financial management. How much of a credit line should we ask for? Uh, do we, should we, should we look for, uh, like a month of expenses? Should that be the, the maximum, or how do we decide? I mean, the banker’s gonna decide too. I mean, I get what we ask for, but how do we know how much of a line to ask for? Yeah, I’ve always thought that it should be equivalent to what a good amount of reserves to have. And, and, and the best advice oftentimes for nonprofits is to have 6 to 12 months of reserves in place so that if something happened in the organization, you could operate for another 6 to 12 months. The more you have, the better. Um, 12 is, is, is great. 6 is, is oftentimes adequate. But it’s not so long ago that we had things like the pandemic where organizations all of a sudden found themselves without operating capital for an extended period of time. And so trying to think about being able to have that, that, that kind of thing. If you can get 12 months of operating expenses from your bank, um, I think that’s great. If you can get 6 months, you’re gonna be able to rest pretty calmly as, as, as well. If, if, if, if you find yourself in a situation where you’re getting to the point where you’re relying on your bank loan for 6 months and you don’t have good prospects for paying that back, there’s probably some other underlying financial stress that you should be dealing with as an organization. So 6 to 12 months, somewhere between 6 and 12 months would be a smart rule of thumb. OK, OK. I had posited a month, so that’s totally inadequate. Well, that shows that I’m not, you know, I’m not a professional banker with 30 years of experience, um. OK, 6, 12 months, and, and, um, interest rates, I mean, are, are, should we expect a fixed interest rate on our line of credit or variable? How does that work? Usually, usually lines of credit are variable rates, um, because it’s, it’s, it, it’s, it’s available at any point in time and the bank can’t necessarily lock in a fixed rate because they don’t know when you’re going to draw on the loan. So usually that rate would be set at some sort of. Right over prime rate, a couple of points over prime rate, and prime rate is something that’s published, you know, every day you can go search online and, and say what’s the prime rate and it’ll it’ll, it’ll tell you and, um, uh, some banks might have a little bit different prime rate, but it’s gonna be right, right, right around that. OK. So, so it’s fair for it to be pegged on the prime rate plus plus a couple of points. That’s a plus a couple of points. That would be a fair. That’s a decent deal we’d be getting on our line of credit. Yeah. And now there’s some ways that you can actually try and pay you um buy down the interest rate, if you will. So if you have sometimes, uh, I know you’re gonna get to endowment in a minute, but if you did have an endowment and you don’t want to draw on it, it is possible to use endowed funds to quote unquote guarantee that that loan will be repaid and becomes a sort of money sure kind of option for the bank. And so that’s the kind of thing that might get you a line of credit at a more preferable. rate. So if you, if you can’t touch your endowment or don’t want to touch your endowment to, to, to, to, to bridge your financial stress points, and you might want to tap a line of credit instead, sometimes guaranteeing the payback of the loan by that those endowed funds, um, is, is a way to buy down the rate. Now, you have to make sure your endowment allows that and a whole bunch of other things, um, and your banker, a good banker will work with you to help make sure that you understand that. That’s awesome. I love that. So, yeah, you, you’re using that as a, as a guarantee, uh, and you probably need a board resolution that, that’s gonna approve that. I, I, I, everybody’s gonna need something different depending on what their bylaws say, but the, the bank is going to want some evidence that, that some, some persons just didn’t decide to do this on their own, but they have the backing of the organization to do that, and that usually is a form of some sort of board resolution or, or signed treasurer statement or something, something to that effect. You hit on something the bank, the bank will look at your bylaws, and they will, they will, they will tell you what they need is evidence that you’re doing a, doing a transaction that is properly approved by your organization. Yeah, because they wanna guarantee that they, you actually can tap the endowment if you need to because you’re having trouble paying back your loan, which, which gets to something you, uh, you mentioned earlier. I wanted to pull a little thread on, um, if you’re, if you’re over relying on your line of credit like how how long should it take you. Before you can pay off the line of credit. I mean, is that a, is that a measure or how do we know we’re, we’re relying too much on our credit line? We’re, we’re basically overextended. Uh, the answer on that is probably it depends, um, and it depends on the reasons. So if, if, if you are an organization that, um, that, uh, for, for, for, for many, many years has received certain grant funding or has, has, has, has written grant pledges of, of grant funding that’s going to come in, but you know it might not come in for 6 months. Um, uh, if, if that is. If that is rock solid finance, you know, funding that’s going to be coming in, and that’s a judgment call on the, on the part of every organization to do that, you can go a little bit longer on a line of credit because you know you’re gonna be able to, to repay it when those funds, when those funds come in. If you’re, if you’re living hand to mouth, Tony, and we all know that sometimes nonprofits live hand to mouth or get in trouble, or that’s just the ethos of, of, of, of how they operate, um. Uh, you probably don’t want to extend yourself too far out, um, because you’re gonna get in trouble and you’re going to really put your organization at risk of defaulting on a loan, um, and, and you really never want to do that because, um, that’s the kind of thing that, uh, makes it very, very difficult for your organization to ever borrow again or even potentially get access to other kinds of financial services. So, so you, you really, again, if you, if you know you’ve got funding that’s coming in to be able to cover it, um, Because you, you have a government contract, because you have um very, very regular annual donors um who give their gift every December, and we all know there’s organizations that do that. If you’ve got grant pledges or multi-year grant pledges that you can rely on to do that, you can go out a little farther on, on, on tapping a line. Um, but if you don’t have those kinds of things, you, you wanna, you wanna be really careful and sort of revert to living within your means. And at that point, if you’re, if you are living. Like that, you probably have to look at the expense side of your income statement and start to think about, OK, what can I be redoing, right, to reduce the cash needs that I have? Um, do you, do you move into a smaller space if you can do that? Um, nobody ever likes to do this, but do you have to think about staffing reductions, um, those kinds of things that reduce your expense profile, um, uh, it’s probably the way you look rather than continuing to extend yourself credit. What kind of help could we expect from a, a bank that, that, that in itself is a generalization, so the answer may be it depends on the bank, but I’ll ask anyway, you know, in the wake of, uh, you know, the, the all the earlier this year, the USAID and, and State Department cuts that nonprofits were definitely counting on, and they had, they had gotten these grants, you know, for years in, in lots of cases. And then come the new, uh, president, uh, things got cut off. What, what, what kind of, I don’t know what kind of sympathy can we expect from a bank or what kind of help can we expect from a bank in, in a situation like that where it was perfectly legitimate for us to expect the revenue because we’ve gotten it over so many years and then it just abruptly got cut. So let’s say about sort of 3 ways banks would approach that. The really bad way they would do it, and there’s some that would do this, they’re going to uh almost immediately expect you to repay that loan. They’re gonna determine that you’re a bad credit risk now and they’re not gonna work with you, right? And they’re going to only have the interests of the, of, of, of the, of the, of the bank at, at, at heart. Um, that, that, those are the kinds of people you wanna Avoid at at all costs if you can. Um, uh, smaller community banks, um, oftentimes you’re gonna think about, all right, this nonprofit is actually really important to our community. How um can we recognize that they’re under a certain amount of financial stress? Um, how can we not avoid a default on our loan, right? Because no bank ever wants to default on a loan, and they’re gonna work with, uh, they’re gonna work with, um, Their, their customers, um, to think about, um, maybe restructuring a loan so that the loan might be paid off over a longer period of time or recognizing that maybe, um, you’re gonna pay only interest payments, you’re not gonna have to pay down on the, on the principal so that you can reduce that payment, you know, for a short period of time while you get through that period of, of, of, of stress. They’re gonna try and understand, do you have the likelihood for replacing, um, uh, you know, funding sources to be able to To do that, but what you really want is to find someone who’s going to then not just call your loan immediately, and most banks won’t do that, but there’s some that are well. But you’re gonna want somebody who’s gonna work with you to give you, to give you the time, right, to restructure so that you can so that you can most, most banks won’t do that, but some will, but some will, but, but, but, but, but some will. But you know, a lot of people, they, they don’t want to take a full, they don’t want to take a full write-off and, and they, they will, they, they will and should work with you, um, to, to, to, to think. Uh, like, how can I make it so that the, the immediate payments are less? How can we maybe spread the payments out over time? Um, they might work with you sometimes to think about, OK, we can’t pay this now, but we, we, um, but, uh, work with us because we’ve had a donor, right, who might step in to guarantee all or part of a loan that might give them the sense of being able to do that. Sometimes banks will even work to help identify, um, those kinds of things because in smaller communities, it’s very. Connected and they’ll, and they’ll, and they’ll know those people. Um, so a good banker is going to, a good banker is going to uh look at nonprofit executive in the eye who’s very panicked and not knowing what they want to do and say, OK, let’s calm down a little bit here. Um, this isn’t the end of the world. We know you have funding troubles. Let’s think about how we get through this and let’s think about how we do this together. And that’s why those bankers who really understand the nonprofit world and what that looks like and just be your, your, your absolute best friend. OK, I like the 3rd 1. I could, I could live with the 2nd 1. I, I like, I like the 3rd 1, like the banker with the heart, the heart, yeah. You’re right, they recognize the importance in the community. All right. Let’s talk about the reserves. Um, I, I think of endowment because I, I do plan to giving fundraising when I’m, when I’m not podcasting. I’ve been doing that since 1997. So the first thing I think of is endowment, but are there other types of reserves that, that, uh, that, that exist before we get to the, the classical endowment. Yeah, I think before you get to an endowment, which is, you know, a big pot of money that you’re ultimately hoping to invest and use the income off of to be able to support your organization, I think you do want to think about operating reserves. And those are the kinds of things that, uh, uh, exactly what we’ve been talking about. Can I get through a couple of months where I might have a funding, uh, a funding lapse? And so that, that, that doesn’t create a true just line of income coming in off of an endowment. That’s, that, that’s your savings account. That’s the money that you have in the piggy bank, um, to, to, to get you through the ups and ups and downs. That’s the money that you have for when the roof caves in. And you, you, you, you need, uh, you need to come up with the money for your insurance deductible, or, or something like that. And so, I think about having operating reserves and that’s where I think that 6 to 12 months of being able to sustain yourself is a good rule of thumb. Um, and then the, and then the endowment, I think is, is, is for other purposes. Right, the, it’s part of the endowment could very well be restricted. To only certain programs and activities. So if the roof caves in, that restricted portion of your endowment isn’t eligible to be spent on, uh, on, on, on the first payment to the roofer. 100% that endowment might be restricted only for a particular kind of program or to underwrite the expenses, the capital expenses for a building that you might have on your site, or, or, or could just be to go into the annual income from an organization, right? That the the endowment just throws off, throws off income and you can take, you know, up to 5% of that income or maybe a little more depending on your endowment policy. Um, and just use it for general operating purposes. But the corpus sits there. The corpus sits there as a long-term financial protection, um, for the organization, and the intent is that it generates income that the organization can use. It’s a little bit different than operating reserves. Um, and I hope listeners are acquainted with, uh, what the, what the rules are around endowment management in your state. There’s a, there’s a, a uniform law that, uh, the uniform, uh, UIFA, the Uniform Prudent Management of Institutional Funds Act, which is not, uh, enacted the same in every state. It was sort of a a model code for states to then modify, meaning your state legislature to modify. So you need to be aware of what the, what the rules are governing endowment management in your state. Do I think that, that, that, that, that’s right. And then your organization’s probably also going to have an endowment policy that you’ve adopted that’s gonna put your own rules in terms of that, uh, and things. And then of course, some donors, right, may have restrictions in terms of how an endowment might be set up. So you gotta know the rules, Tony, in terms of what you can do and what you can’t do, and, and, and if you don’t follow those rules, um. You can get in trouble either with the attorney general in your state, with the IRS, um, or, or just even with your own board of directors or donors, and you just don’t want to do that. Yeah, just your donors for not following their restriction, right, right, yeah, so there are multiple levels. Um, thank you, thank you. Well, in terms of spending rate, do you still see like 3 to 5% typical spend rate for endowments each year? Yeah, I think that’s, that’s what we see, 3 to 5%. So exactly the 4% is kind of the, the sweet spot in terms of what you would draw down. Um, that allows you to continue to allow your endowment to grow and hopefully be able to, to, to throw off um more income. Um, UMA I think limits you to 8 if I’m not mistaken. I there’s something around that in most states, um, and, and, but most organizations. don’t want to do that because, you know, the anticipated rate of return for an endowment is usually gonna be between 5 and 7%. And, um, and you don’t want the, usually don’t want the endowment to shrink. You want it to continue to, to, to grow to, if nothing else, keep up with inflation, but just allow you to throw off more income every year. And, and so that’s, that’s usually the anticipated draw that I’ve, I’ve, I’ve, I see. It’s time for Tony’s Take too. Thank you, Kate. I was scrolling through way old calendars going back and Uh, there was, uh, there was a, a reference to Sam Liebowitz on this, uh, old calendar, and that got me thinking, remember the show started in 2010 in Sam Liebowitz’s. Illegal studio, get to that in a sec. Uh, it was on West 72nd Street between Broadway and Columbus. They had to walk up, it was a 2nd floor walk up. The guests, so I would always get there early, of course. Oh, and, all right, so wait, wait, I got a lot of things. So why was it illegal? Because he was doing it in an apartment. He was running a business in an apartment which is illegal in New York City. You can’t do that. But he rented it as an individual, and then he ran the the studio out of it. And we, there were probably, I probably had 6 or 8 shows per week that he was doing out of there. And then his wife, we’ll get to her in a sec. Uh, his wife was running, uh, a therapy practice out of there also when he was not using it as a studio. So but it was illegal. It was it was legal for both of them, illegal because those are both businesses and this was a residential apartment, but he was cheating and I, no, you know, I didn’t turn him in. If I could have got some money for it, I probably would have turned him in, but, uh, but I, uh, nobody ever offered me any cash, so to be uh to be a, uh, what’s that called, to flip to flip, to be, to be a CI confidential informant on Sam Liebowitz. Nobody ever offered me anything, so I didn’t do it. Uh, and he was there for probably 2-3 years, so that would been like 2010, that’s July of 2010, of course, when the show started. We were there for 2 or 3 years after that. And when I would get there early, like 15 minutes early. There was always, there was the divorce attorney, and you, you, you have to be listening to the, to the show for a long time to remember this. So there aren’t too many folks who may remember this, but, uh, his name was Larry Bloom, and he ran a show called The Divorce Hour with Larry Bloom. And so I would always walk in and he’d be talking, but he, he rarely had guests, rarely. Usually it was him. And see, the thing that he was going through his own divorce at the time that he was, that he, and he had been a divorce attorney for decades. He had like 2025 years of experience as a divorce attorney. And now he’s going through his own divorce. And the show, and Sam and I used to talk about this too, after, after Larry left the studio. The show was kind of cathartic, I think, for Larry Bloom because he would just read his notes. He had, and he had handwritten notes, many, many pages of handwritten notes because he’s got an hour show like, like I did. So you can imagine how much you got to write to read for an hour. And he was talking about, uh, his own divorce and The bad treatment that his wife was giving and he was bringing his kids into the thing and Uh, you know, of course, I only caught 15 minutes, roughly 1520 minutes every hour. He was an interesting guy. That was the show before me. And then I would, then I’d come. So then, uh, I was at 1 o’clock every Friday. Friday, 1 to 2 was my slot, and then I would start my weekend. 2 o’clock. The show’s done, weekend begins. Sometimes I’d go downstairs. There was a Chinese restaurant, might have some lunch, maybe a glass of wine, but in case I would start my weekend after this show was, was over. And the guests who were coming. They couldn’t buzz. You couldn’t buzz to get into the apartment slash studio because the buzzer, you could hear the buzzer on the mic. So my guests would be coming not as early as me, but they would be coming like 5 minutes early. So Larry would get annoyed if one of my guests buzzed because he’s still on mic. He’s still on the air. So we try to avoid that annoyance and people would just text me and then we would, we would buzz them in. Yeah, Larry Bloom, he was uh he was a bit of a character. And then, so, and then I mentioned Sam’s wife. She ran the therapy practice when he wasn’t using it as a studio. So, uh, she was Chinese and her name was Hong, H O N G. So I used to think, I never, I always thought of a stand up bit for this, but I never, I never performed this, but I had something written that New York City is the only place you’re gonna find a woman named Hong Leibowitz. Classic Chinese and classic Jewish name, Hong Leibowitz, not gonna find it anywhere else. So I was reminiscing. That’s it, you know, that’s uh, those are the reminiscences of the early years of Tony Martignetti Nonprofit Radio in Sam Liebowitz’s studio. Oh, and he had the crystals. He was, um, he was like a holistic practitioner too, and he had crystals on, on the studio desk and they were supposed to emit some kind of Power or orb or something, I, I don’t know. I, I didn’t believe in the crystals, but a couple of my guests through the years would say, whoa, you know, can I hold the crystal while I’m talking to Tony? Uh, sure, yeah, I’d rather hold that and something else. Sure, you wanna hold your crystal, go ahead, or hold Sam’s crystal. Uh, sounds a little sounds uh sounds, sounds a little, uh, risque to me. Hold, hold on to Sam’s crystal, but, you know, if you want to hold that, if it gives you comfort, if it emits something valuable for you, by all means, you can, you can hold it, you can hug it all you like while you’re, while you’re with me. So that was Sam Liebowitz’s studio on West seventy-second Street in New York City. Loved it first couple of years. And that’s Tony’s take too. Kate. Sounds like you could do your show and then go to therapy right after. You could have if my, my, my, if my therapist had been Hong Leibowitz, I could have knocked off to uh to at one time, but I was ready to start the weekend. 2 o’clock I was exhausted at because the show was a performance and we were, oh, I didn’t even mention that we were live streaming. We were live streaming on Facebook. So occasionally, very occasionally, we would get uh questions uh through the, through the comments on Facebook, but that was very rare. But uh, yeah, we were live, I forgot all the shows were live streamed so Larry Bloom was live. And then there would be a commercial for, for Sam’s studio, talking alternative network, and then my show would come. Yeah, we were, we were live streaming and there was also, of course, recorded for uh podcast purposes. We’ve got Bou but loads more time. Here’s the rest of managing money and your banking relationship with Keith Mstrich. Anything more about uh the reserves between the operating reserves, the endowment, anything more you want to say that I didn’t ask you about or we didn’t talk about? I, you know, again, make sure you have them. Don’t be afraid of debt. If you manage it smartly, it can be a tool, it can be a tool in your toolbox, and everybody in the for-profit world, you know, uses it. Just make sure you’re getting good advice, both internally from your auditors, um, who can give you good advice on this oftentimes as well. Um, and, and, and hopefully, you have At least one person on your board of directors, um, who has a financial background and can help you think through this and, and I know, I know not every executive director comes to the job having been trained, um, in, in, in, in organizational finance. Um, they, you know, a lot of, a lot of people get, yeah, a lot of people get promoted because they’re the best program person and then wake, they wake up one day, they’re the executive director and they’re expected to be a, you know. Uh, a mega administrator on all this. So that’s where you really want to look to the trust of people on your board, your treasurer, um, your board treasurer, and, and, and why it really is important that one or two people on your board can really be on your finance committee, provide that right level of oversight to make sure you’re not overextending yourself. Um, but, um, have some experience and background that can be your advisor and really help you. help you do that. Really important on smaller nonprofits who might not be able to hire the, the top level of sort of financial staff, um, or gonna be reliant on third-party bookkeepers who are trying to divide their time and attention amongst multiple organizations. The, those advisors on your staff can be really valuable um uh uh resources, um, for, for, for you. So, at, uh, I mean, you’re, you’re a senior advisor to a company called Crescent Care. So I’m gonna, I’m gonna give you the benevolent label of, of banker with the heart. How did you, how did you, uh, come around to that? What is it, what is it in your background that, uh, you became, uh, you were CEO of Amalgamated Bank instead of, uh, JP Morgan or Chase? Yeah, well, I spent most of my career, Tony, working in the, in the labor movement and working with trade unions around the country, a particular kind of non nonprofit, um, and there were a bunch of unions in the 1920s, um, who actually established banks, and there’s a couple of them that exist today, and one of them is the Amalgamated Bank. And the union I worked for owned that bank and I um I, I ended up um doing a lot of work with that and, and, and one day found myself um going to work for the bank and ultimately becoming the, the CEO of the bank. And it was a bank that really focused exclusively on, um, on the nonprofit community. Both are, are traditional bases, as unions, as, as unions as non-profit businesses, but then doing lots of other non-profit organizations as well. Um, I retired from there in 2021, um, and, uh, and, um, met up with the team at Crescent who’s been trying to take some of the tools that they built for small and medium sized businesses and really say, you know, we could develop a really great platform for nonprofits as well to really bring good technology to the table in terms of integrating with nonprofit accounting systems and other tools that are out there, um, thinking about, um, uh, a lot of times. Nonprofits are really taking advantage of uh of of by banks, because the one thing that nonprofits have that banks like is deposits. And because, and this isn’t meant to, to, to, to, to, to, to speak negatively about nonprofits at all, but sometimes non-profits don’t ask for as much money in terms of the interest that they might earn on their, on their, on the deposits that they’re putting in a bank. It’s a deposit banks love it because it’s a low cost of funds that they can ultimately lend out. And so trying to think about how can you work with nonprofits to know that they can actually maximize the return that they get on all of the funding that they, that they have in a bank, and then really trying to keep the fee structure low, right? Because if you can pay a lot of interest, if you can keep um fees really low, That’s as good as another source of income for a lot of nonprofits. And that’s, that’s, that’s how smart bankers should be thinking about relating to, to nonprofits. How can I maximize the income going in the non-profit so they can turn that into more more programmatic activity or another staff person or something like, like that, not leaving money on the table if you will. And then, and then ultimately, you know, if, if we can do those things, you know, that additional staff person might be a fundraiser. So that our, so that our deposits are rising. 100 100% or even a even a, even a fractional fundraiser, right, if it’s not a, not a lot of things that you could plow into doing those kinds of things and, and yeah, increase the top line um of your, of your, of your organization to just be able to, to, to, to do more. Now you mentioned something just in passing, but caught me, um, uh, the, the interest rate you can ask for, like, is, is the, is the interest rate negotiable on, on, on savings? Sure, it’s all negotiable, um, and because ultimately you have, you, you, there’s, there’s no law that sets what the interest rate is. Um, there, there, it’s really an individual decision in terms of what the, the, the, the, the bank wants to pay. And if you are willing to Leave your financial institution and go to another one that might pay you a little bit more interest. It’s the same as being able to negotiate any anything else. A lot of, a lot of nonprofits, um, uh, they don’t do that. They, they just think I’ve got this bank, I have to be there. I have to leave it there forever. They have a posted rate. They pay 1.05% on savings and So that’s what I’m gonna get 1.05. That, that’s what I’m gonna get. But if you’re, let’s, let’s take uh uh an organization that’s done a good job of having some reserves and might have a small endowment that needs to be managed, but they don’t want to necessarily go out to a big money manager. I mean, there’s lots of nonprofits that have a million dollars of operating reserves. That’s a really, really, that’s a really, really good account for a bank. Most bankers don’t want to lose that. And most branch bankers really don’t want to lose that because they’re being evaluated on how many deposits are in their bank and, and a number of other things. And, uh, and, uh, uh, but they’re not gonna, they’re not gonna offer it to you. But if you say, you know what, I’ve only been sitting here and I’ve only been getting, you know, 0.35% on my, um, on my savings account here and um I To the bank down the street and I said, I’m willing to move my relationship over here. What will you pay me? And they told me they pay me, you know, 1.5% or 2% or 3%. Um, I’d go right back to the bank and I’d sort of say, well, what can you do for me? And, and, and do that. And people should not be afraid to, people should not be afraid to, to, to, to, to leverage that relationship, to a certain extent. And I think it’s just one thing that you, you. said it to me, you’re just like, well, here’s the rack rate. I’m just gonna take it. I don’t, I don’t have an ability to do that. That’s just not true. Um, now, if you have a balance of $5000 in the bank, you probably don’t have a lot of, a lot of leverage, uh, in things, so you have to play it appropriately. But that’s not the case with a lot of nonprofits. A lot of nonprofits have, have a good amount of reserves, and, and those are valuable to the bank, and they should be, they should be working for you. We, you know, we, we also were, we were also in that period where there was no interest for a long time. Remember, after the financial crisis in 2008, we were in a zero interest rate environment. So a lot of people just got lazy. They didn’t think there was anything else out there to do. But there’s, there’s, you know, CDs on the marketplace right now that pay 4%. 10-year Treasury bond pays 4%. That’s kind of a peg for banks and people should be pushing, right, to get those kinds of rates. 4%, a million dollars, $40,000 you know, annualized, and that’s, to your point, that’s a part-time fundraiser. That’s a, that’s a part-time clerk that can help out on something else. That’s, that’s, uh, that that’s Keith, that that could be our, that’s our endowment spend. That might be your endowment if we have a million dollars now we’ve just like doubled our endowment. Income, yeah. Now, now, here’s a tricky thing, I think sometimes for executive directors because when they say something like that, they might hear right from their, from their, their staff, oh my gosh, do you know how much trouble it’s gonna be to, um, you know, to, to, to switch to a different bank? I’m gonna have to change all my bill pays. I’m gonna have to do a lot of work for somebody. I hate the naysayers, please. I like I whine. Oh, it’s gonna be terrible. So, so here’s the other thing. Push your bank or push your banking partner. How are you gonna help make it easy for me? And, and, and they can do it because what a good banker, again, banker with the heart, I love that, can do is they can come and really work with your team to help do the transition from one account to another, and, and, and really do the things like set up who has permission to be in this account, who’s in these, in these flows. And a smart Banker is gonna say to you, I can help you make this transition really easy for you. And, and because it is work for, it is work for somebody and, and, and it is, it is, you know, we do have finance staff that oftentimes are understaffed and we put a lot of pressure on them. Um, but, uh, but, uh, again, if the relationship is valuable to the bank, you know, the, the financial partner will help you, help you, um, um, move over. That’s outstanding and, and we keep trying to say it’s outstanding and then you pile on more outstanding info. Go ahead now with technology, Tony, there’s so many great tools out there to make things like payments so much faster, so much easier. Any nonprofit that still has a checkbook and is writing checks. Get into the 21st century because everything should be done being electronically. It’s easier, it’s faster, it’s safer. Checks are an incredibly dangerous way to lose your money as an organization. They get stolen, they get, um, they get, they get what’s called washed, and then people come up with counterfeit checks. That’s how people are getting ripped off and people need to be moving to more advanced payment systems these days as well. All right. Um, All right, since you opened the subject tech, I, I was, I was gonna get there after board reporting and some KPIs, but let’s talk about use of technology. All right, so checkbooks, we, I mean, I guess you should have one just for emergencies or something. Yeah, I have an emergency, you know, the, the system breaks down, you know, somebody, somebody can’t take an electronic payment, um, you, you, you have a volunteer that doesn’t, uh, can’t get paid any other way, um, you, you know, that, that kind of thing, but yeah, as well as a general rule, don’t do those anymore. OK. All right, what else, uh, technology-wise, should we be leveraging then this banking relationship? Yup. Um, so, uh, cards, right, are a great way to be able to do things, issuing your staff either, um, debit cards if you’re comfortable with it, credit cards if you, if you like. But good banks now can, um, uh, there’s, there’s ways to very, very quickly be able to issue every one of your employees with a card that has all kinds of restrictions on it. You can tap the amount of money that’s on it. You can limit it to only being able to be spent. That certain kinds of, of things, um, you can issue a card and by the way, it’s not even a card anymore, it’s just a virtual card, that’s a number, but that could be just for, you know, grant expenses for a thing that really makes, um, uh, making sure that, uh, only money’s coming out of this account, um, that might be restricted are going just for those grant purposes, and then at the end of the year, it’s gonna be a lot easier to, to, to, to do. Year end of the year reporting back to that foundation, um, that gave it because all your, all your transactions are, are in one place and really easy to do your 990 at the end of the year as well. So, so, so people have been afraid of cards, right? Because they think people will abuse them or other things, but now the ability to, to manage cards and, and, and prevent that is, is, is really terrific and, and, and, and really awesome. Um, Keith, let me just, do, do we still call them cards even though it’s, it’s a, it’s a virtual, it’s a digital digital wallet, it’s really digital wallet kind of thing or sort of digital payment kind of thing, or it’s just a number that you use to make a to to make. Make a payment, but yeah, I guess they still call them cards. I mean, even if you think about when you download a card into your iPhone now, right, and, and, and stuff, it’s still, it still looks like cards and all those guys we still call, we still, we still call them cards. So and you can restrict who, who has access to the, the, the specific account that that comes from this grant fund. Yeah. So, so let’s say I, uh, let’s say I’m, I’m gonna, um. Uh, I, I, I’ve got a, I’ve got a grant to do, um, uh, to provide, uh, uh, food assistance in Kalamazoo, Michigan. And you know, so Tony and Keith are the staff people that work on it. They’re the only ones that have access to that card. The only money that’s available on that card is the money that we got for that grant. There’s no other monies that are available on that card. Um, it can, it can only be used um to make purchases at supermarkets or, um, whoever else you might be, you know, farmers’ markets, wherever you might be getting, getting food from. No other purposes can be, you, you know, you. for that and the, the spending on this cannot exceed X amount. You can set it up to that level of, of, of specificity and, and, and the, the, the smartest tools now, literally, uh, uh, a, a, a good bookkeeper can be sitting at the, at their computer and just set this up in minutes. It’s, it’s really slick, it’s really cool and um it takes away all the things. that, uh, I never met a nonprofit staffer, by the way, who liked to do expense reporting. Um, it’s usually one of the things that, that is, is, is, is, is hated for lots of good reasons. Well, now, now the, uh, the, the card’s gonna do a lot of that cause you’re gonna, you’re gonna know that this was spent for this and it’s gonna track right into your chart of accounts as a, as a, as an accountant for an organization. It’s just, it’s faster, it’s more accurate. It’s, it’s safer and more and more secure. Um, and, and again, you, you know, I don’t mean to keep going back to what I really love is your banker with a heart, but your banker with a heart is gonna teach you how to do this and get you set up in the right way and, and demystify, um, a lot of these things that everybody’s out there. I heard that this exists out there, but I’m really afraid about putting it in my organization cause I’m a, I’m afraid I’m gonna screw it up. Um, and, uh, you know, we’re gonna be, or we’re gonna be taken advantage of, it’s not somebody’s gonna use spend more than they’re allowed, or, you know, but you’re saying there are all these levels of control. Yeah, and, and smart, smart financial partners can teach you how to do that. All right, so we need to overcome our long-standing fears of credit card abuse. Yeah. All right. And, and technology, right? And, and I, I, I, I think one, if I could leave your listeners with one thing, there’s a lot of people who think that electronics, this is not the wrap up yet. You got other subjects, but there, there, there, there, there, there’s lots of people think that like electronic payment, I’m gonna get ripped off it. My numbers are out there in cyberspace and, and, and all these kind of things. The most dangerous transaction you can do today is send, sending a check through the mail. That is the most dangerous, most open to fraud kind of transaction that you can, that you can do. Electronic payments are, are much, much, they’re much, much safer. They’re traceable, they’re trackable, you can retrieve funds, um, and, uh, it’s, uh, it’s, it’s a much smarter way to run an organization. All right. Is there, is there another technology you wanna share? I mean, that, that, that’s, that’s valuable to know. I mean, especially it helps with the accounting and the, the, the, uh, yeah, the accountability back to the foundation, the reporting. Um, is there other, is there other tech that financial tech we should know about? I, I, I think online invoicing and online bill payment is really something that’s, you know, really good to do. Um, you can, you can track your bills, you can, you can manage your payables um in a way that, that allows you to pay when, when you want, um, and, and do that. And I, and again, you can do things like for recurring payments, you. could set up a lot of templates and things that really, uh, the, the old fashioned ways you have to write a check to your landlord every month. The newfangled ways you set up that payment once, once at the at the beginning of a lease, you make it an automatic payment, you never think about it again. You just, you just approve it when it’s going to happen, but you don’t have to go through all the mechanisms, the, the machinations of making those payments. And there’s, there’s lots of technology like that that can just make a Uh, it’s, it’s both more efficient and it’s more accurate. And I think that’s the other thing, right? It’s really easy to transpose numbers, it’s really easy to do. Technology can make things a lot, a lot more accurate and, and a lot easier to reconcile at your end for, for, for for people. You forgot to sign the check. Yeah, um, and then, and then the other thing I sort of say is, is, um, from a fundraising perspective, right, on the other end, there are a lot of people who don’t want to send you a check anymore. They want to pay by card and, and increasingly, um, making sure that you have good tools to be able to take credit card and debit card payments and other forms of payment and be able to bring, bring those in and do it in a way that um um uh A merchant, what’s called a merchant processor, that company that is processing those payments for you, isn’t taking, you know, 3 or 4 or 5% of your, your pay and, and working with somebody who’s gonna make sure that, that, that, that payment that you make to process that payment isn’t gonna be, isn’t gonna be a rip off. But you want to set up the ability to have people pay you by, by uh electronic means and to be able to access all that small dollar fundraising. Um, that is out there. You want to make it simple, make it simple for people. I think there’s a lot of people nowadays that are like, I might be willing to give this organization, but don’t make me write a check, put it in an envelope, put a stamp on the envelope, send it in the mail. But if all I gotta do is be on your website and put my card in, uh, you know, I’ll do that. Oh, by the way, I might just click that button that says, do you want to make this a recurring payment as well? And, and can be hugely valuable for organizations. I think you’re talking about everybody under 35 years old. You know, writing a, writing a check, requiring a check is now a barrier for, I think anybody 35 and under. I gotta write a check and forget about it. I mean, they, but I’ll take the card option and maybe I will make it recurring, and now I don’t have to think about it. Yeah, yeah, by the way, I, I, I have 3 kids in that, in that thing. I bet I could go to them right now. I bet not one of them has $1 cash on them. So they’re just paying everything by card. They’re paying everything by card. So, so we have to, we have to, we have to be able to adapt and be able to take those kinds of payments, otherwise we’re not gonna get that donation. Let, let’s shift over to board reporting. What, what numbers should a board be looking at? Let’s say board meets quarterly, uh, without, without being too much in the weeds, but you know, what are, like, I guess KPIs because in a, in a minute I want to ask you about KPIs for the CEO like what should we be looking at like week to week even? But KPIs for the, for the board that meets quarterly. Yeah, um, so, uh, we’ve talked about some of them, right? I, I think, um, I, I think some of it is, is, do we have cash reserves and how many months could we operate if we had a real, a real problem. Um, I, I think that budget, the actual report is a really, really important report that boards should be looking at and looking at carefully every month and making sure that they really understand. that, right, we said we’re gonna spend this much money. Where are we? And are we, are we tracking appropriately? Now, don’t be a slave to the, to the, to the number that you set, you know, in January, when you’ve gotten to September because things change. Just make sure you understand why it changed, right? But I, I think, I think under understanding that and, and doing that is important. We talked about that cash flow report. I mean, a board should be able to understand that we’re going to have cash to be able to make our payments for the next several months, if not for the next year, um, looking out and, and looking forward. Those reports you don’t often, you don’t often get. Most organizations get the balance sheet. OK, great, you know, I mean, we have this much in our bank account, and our buildings worth this much, and we have cars that are worth this. That, that tells you a little something, but it’s really that day that management is, is, is, is the management of the organization on top of how much money we’re going to need? And if we get in a bind, are we gonna be able to survive for a while? I, I think those are the most important things that the, the non-finance people on the board in particular should, should, should be asking and should know. It sounds like you ticked off three things. I think cash on hand, like cash reserves, versus actual expenses. And, and monthly cash flow, do we understand what our monthly cash flow needs are? And do I have confidence that the organization is going to be in a position to, to meet those cash needs? Cool. All right. Um, how about for the CEO who’s probably looking like weekly or, you know, if, let’s say it’s a CEO that does not have a CFO, maybe they have, uh, if they have a let’s say they don’t even have a fractional CEO, which that would be, uh, that’s kind of rough, but We like, we have a bookkeeper, you know, uh, and it’s a staff of 5 or 6, and we don’t have a chief financial officer. What, what should, uh, the CEO be looking at week to week? So those same things are important for a CEO as well. Obviously, you’re gonna, you’re, you’re going to, to want to, to know, to know that. Um, I think the other, the other important thing is, is, um, money in is obviously super important. And do you understand what your pipeline of money in is coming in? Because in this world we live on fundraising, right? And so, Um, while there are nonprofits that certainly have nice sources of earned revenue because they have ticket sales or they have, um, you know, guests to visit a museum or they have, whatever, you need to understand, you really need to understand your, your, your money and, and, and what is your degree of confidence on it. And, and can you look out 6 months, 12 2 months in advance and sort of know what your funding sources are, are in at any given time, have some reliability on those. So, if you are reliant on earned revenue, are your earned revenue projections meeting, are your earned revenue actuals meeting your projections? And if they’re not, you gotta be on that right away. A lot of organizations let it go too long and you sort of say, we thought we were gonna have. You know, $10,000 in ticket sales this week. We only had $6000 and that’s happened two weeks in a row, right? You need to be making adjustments right away. Either, you either need to adjust prices, you need to think about expenses or whatever. But if those things aren’t coming in, you gotta be on it, you gotta be on it right away. Um, if you’ve um had expectations a certain amount of Grants, and some of those grants, you don’t get off kilter. You, you need to do that. If, if major donate, you know, major donors aren’t, aren’t coming in, you, you need to know that. Now I, I think, I think early warning systems on, on anticipated income need to be acted on very, very, very quickly, and I think a lot of people let it go way too long. Um. Um, financial reporting is always a looking backward exercise. So you don’t want to be too many people are reliant on my monthly report that might come out 3 weeks into the month afterwards. And, and by that, if, if all you’re doing that at that point is trying to think about that, that’s too late oftentimes to make corrections. So you really need to be on those, on those, on those, on those incoming kinds of things, um, very, very early. Um, uh, and then on, on the expense side too, right? You gotta make sure expenses are tracking, um, right? And, um, that’s a, I always find that to be a little easier because those are things that are much more under an executive’s control, right? You can control how many people you have. You can, you, you, you can’t always control things like The unexpected rise of health insurance expenses which just happened. So, you have to have some ability to do that, but, but, you know, I think it’s much more important to make sure that you know what your sources of revenue are looking like and, and are, are they coming in as, as anticipated. OK, all valuable. Thank you. Yeah. Um, so, Crescent Cares, uh, I, I, I guess Crescent Cas doesn’t offer any of the products or services that, that we just talked about, you know, you’re not, you’re not bankers with a heart at all. Uh, you don’t offer anything that we, anything we just talked about for 50 minutes, it’s it’s not, it’s not on your table, right? It’s not, we, we offer all the things I, we offer all the things I just talked about, right? And, and, and did that. And a lot of what Crescent Cars is doing is a lot of things from a technology standpoint that I would have loved to do when I was at, at, at Amalgamated, um, banks are stuck with a lot of old technology, and there’s. A lot of the new, they sometimes are called FinTech or other companies that are doing things online, they’re partnering with banks, but they’re doing a, they’re doing a uh uh a technological interface that is just superior to the, the old technology that a lot of banks are, are stuck with and that’s one of the things that, that Crescent CARS has done, which is to, to really bring modern technology to the, to the fore. Um. It’s there’s lots of fintechs out there doing it. Most of them are doing it for the for-profit sector, uh, going all the way back to the beginning of our conversation, because that’s where they think the bread will be buttered. Um, organizations like Crescent Cars are saying like the nonprofit sector is huge. Why, why aren’t there, why aren’t there more banks that sort of say, hey, we could actually You know, build, um, the same products and services, but have the mentality and the temperament to support the nonprofit sector. Um, sometimes people will need a little more help and assistance to thinking about how to transform to those new technologies or just need a little bit of a bigger helping hand, um, to get through financial tough times. All right. Thank you, Keith, really valuable. Uh, you, you’ll find Keith on LinkedIn. Uh, I sent you a, uh, I sent you a uh connection request. I hope you’ll accept. Uh, and, uh, and you’ll find the company at, uh, Crescent Cars.com. Keith, thank you for the like banking insight, you know, the relationship that we can expect, the fact that we can talk about interest rates, have a, have a negotiation around interest rates, all very eye opening. Thank you very much for all that. Great, Tony, I enjoyed it. Next week, bookkeeping red flags and your boards oversight. Notice, notice there’s, you get two financial management shows in a row. This week, money management, banking, next week, bookkeeping, these these things don’t just happen. This is very all intentionally planned out. I got lucky. If you missed any part of this week’s show, I beseech you. Find it at Tony Martignetti.com. Our creative producer is Claire Meyerhoff. I’m your associate producer Kate Martignetti. The show social media is by Susan Chavez. Mark Silverman is our web guy, and this music is by Scott Stein. Thank you for that affirmation, Scotty. Be with us next week for nonprofit radio, big nonprofit ideas for the other 95%. Go out and be great.
The CEO of the Association of Fundraising Professionals (AFP), returns to share his thinking on the GoFundMe chaotic week in October, addressing the decline in families who donate to nonprofits, and our community’s perception and messaging challenges. It’s an open, honest conversation with this leader of the nonprofit sector.
We’re the #1 Podcast for Nonprofits, With 13,000+ Weekly Listeners
Board relations. Fundraising. Volunteer management. Prospect research. Legal compliance. Accounting. Finance. Investments. Donor relations. Public relations. Marketing. Technology. Social media.
Every nonprofit struggles with these issues. Big nonprofits hire experts. The other 95% listen to Tony Martignetti Nonprofit Radio. Trusted experts and leading thinkers join me each week to tackle the tough issues. If you have big dreams but a small budget, you have a home at Tony Martignetti Nonprofit Radio. View Full Transcript
And welcome to Tony Martignetti Nonprofit Radio, big nonprofit ideas for the other 95%. I’m your aptly named host and the podfather of your favorite hebdominal podcast. Oh, I’m glad you’re with us. I’d come down with nephromegaly. If I had to pass the idea that you missed this week’s show. Here’s our associate producer, Kate, to give you the highlights. Hey Tony, we have another conversation with Art Taylor. The CEO of the Association of Fundraising Professionals returns to share his thinking on the GoFundMe chaotic week in October, addressing the decline in families who donate to nonprofits and our community’s perception and messaging challenges. It’s an open, honest conversation with this leader of the nonprofit sector. On Tony’s take too. Thank you, Sarkiy’s Foundation. Here is another conversation with Art Taylor. It’s a pleasure to welcome back Herman Art Taylor. He’s president and CEO of AFP Global, the leading association for fundraising professionals worldwide. Prior, he had a 24 year tenure as president and CEO of the Better Business Bureau Wise Giving Alliance. AFP is at AFPglobal.org. And you’ll find Art Taylor on LinkedIn. Welcome back, Art. I mean, abdominal. I gotta look that word up. How do you spell H A B H E B E B D O M O M I N A L I D A L I. H E B D O M I D A L I D A L. Wow, abdominal. Oh, weekly used especially of organizations that meet weekly. Got it. Abdominal. Wow, OK. Weekly. I feel like any schmo could say it’s your your favorite weekly podcast. Only Tony nonprofit radio is gonna call it your favorite abdominal podcast, man, that is a new word for me. I have to I have to use that somewhere. I have to figure out where I wanna use that abdominal. It sounds like a hernia. I don’t use it anywhere but here. I’ve never used it. I don’t think I’ve ever used it anywhere else. I don’t have abdominal meetings with clients. I just have weekly meetings. But here, uh, it, it works. It’s good to see you again. Good to talk to you. Thank you for coming back and sharing some thoughts. Um, I, I, I feel like this is only a couple of weeks old. Uh, I have to ask you about the The GoFundMe chaotic week uh uh uh in uh in October, uh, you were, you were, uh, hearing feedback, let’s put it benignly, hearing feedback from, uh, from members. You were engaged with GoFundMe. What, what, what can you share? Well, I can say there was a lot of heat around the issue for sure, you know. There was some abdominal heat going on, you know, it only lasted one abdominal period. It was a abdominal period, which I think is about right. I mean, from a timing standpoint. Um, clearly, there were some things that they did completely wrong. You know, I mean, Yeah, I think the, and, well, let me start with this. You can’t take someone’s brand. And put it up there without their permission. You also, it’s also not advisable. To, um, not communicate more broadly with the nonprofit sector before you release something like this. Because you might have been advised to do it differently, right? It’s also important to be clear about what’s gonna happen to the data long before, you know, it goes out. So, And there are other issues too. So there was no shortage of Justifiable criticism. None. And so I heard, I heard that from some of our members. There were also many of our members. Just being honest, who probably never knew anything about it. And just were going on about their business. But there was some vocal criticism and loud criticism. And so I felt like I need to just go and talk to them and see what’s going on with this thing. So I did. I reached out to The folk there that I have contacts with. And essentially said, are you aware that what you’re doing is a bit of a challenge? And, and they were. In agreement by that time, right? They understood that what they did was Not helpful. In fact, it was more harmful for them. Because It may have foreclosed an opportunity to do something really valuable. For nonprofit organizations through their platform. And what do I mean by that? GoFundMe gets over a million daily transactions. On their platform. And so What a great opportunity it could have been. For some nonprofits to benefit from that traffic, right? To get people who May not have known anything about some of those organizations. But found out about them through there. Transaction on GoFundMe. And What a great opportunity it could have been. For those nonprofits to receive data about those individuals. Who gave that money, which is something that you don’t get on many platforms today. But they could have gotten data about who the donor was. So that that organization could then go out and establish a relationship with that individual outside of GoFundMe. A tremendous missed opportunity, I think in that regard. But in talking with them, they understood and they took it down, which was the sensible and only thing they really could do. We’ll take it down. We will in the future, try to work with leaders to figure out what the appropriate um. Posture should be what what type of product we might offer that can do some of that. And so, you know, that’s kind of the right result. I think if, if they can work with. Some of the organizations to see what the right approach from an ethical and um Operational approach is, that’s fair to nonprofits, that maybe gives them the ability to, to earn enough to keep the platform going. I think that’s a win, because Tony, we need the innovation. Yeah, I’ve said this many times. We have seen our donor base decline. By multiples over the last 20 years. I mean, if you go back to 2000. We were at 66% of families giving to nonprofits. And the latest information we have from the fundraising effectiveness project, of which AFP Foundation is part of a partner on. We’re somewhere down to 41.5% of families today. And so if you look out another 20 years, there may not be anybody given to it now I’m, I’m obviously hyperbole, but that’s that’s a from from 2/3 to well under a half. Yeah, so I understand, listen, I understand the outrage. I understand how organizations were really upset by what happened and GoFundMe deserve that criticism. But I think we got to find ways to work better with them and others. On finding opportunities for us to get everyday donors back in a given game. Because we can’t thrive as a society. With less than a third of the people given the nonprofits. So that’s my thing. I think it was a moment for us to really take a deep breath and say, oh. Yeah, we should be disappointed by how this happened. But then ask ourselves, is there anything else like this that can generate that potential kind of attention for nonprofit giving? And if not, how do we work with it so that we can put it in a place where it can be viable and useful for all of us and I know everybody won’t agree with that. I mean, some people are like, let’s just cancel it. GoFundMe, go, go, they want to go go somewhere else. No, that’s what I’m just saying from my perspective, I’m more into let’s figure out how we can make this work for nonprofits. And so that’s, that’s the uh the approach I would take to it. I was one of the critics on LinkedIn. Uh, there was, there was a lot of activity there. Um, and, and I agree with a, with a site that gets a million transactions a day. We just, we wanted them to have done it more collaboratively, smarter, you know, you’re acknowledging they did things wrong and and they do too. Yeah, in hindsight, right, in hindsight. And it ended up, you know, it was, it was part of a, uh, uh, it became a moment, I think also because of the culture, just what the nonprofit community is suffering under the, the, the Trump, the regime or administration, however you picture it, um, you know, the community’s been, been battered badly in terms of money and reputation. So there’s only so much battering uh uh a community can take until it reacts, uh, strongly, um, so they, you know, yeah, uh, and I agree with, I, I certainly don’t agree with just like cancel GoFundMe like don’t, don’t deal with them on a nonprofit level. I, I don’t run a nonprofit, but if I did, I, I wouldn’t cancel them, um. I would look to, you know, how can we leverage a million transactions a day? Is there anything in there that, that we could, we could benefit from? I, you know, but we wanted it to have been done, uh, collaboratively and it felt like it was foisted. Uh, you know, badly. I wanna say comment on one other thing you said about the culture right now, right? And Something really good happened to me that week, by the way. I received the Independent sectors John Gardner Leadership Award. Which is a big effing deal. It’s, it’s a big deal. It’s, it’s like. I don’t know if I, I could ever get an award more prestigious than that for what I’ve done throughout my career. So it was really great to be recognized that way. So, um, one of the things they do when you get this award is they give you a few minutes to talk about something on your mind, and I used it to talk about what we see as a decline in trust in institutions. Because I feel that that is also part of what’s happening here and, and maybe what. So many of us were concerned about with the GoFundMe thing. And what I said was. Um, even when we were at the Wise Giving Alliance, we noticed that there was this thing called the trust gap. Every year, Wise Giving Alliance does a study called the Donor Trust Report. And we measure the, the disparity between the percentage of people who feel that they feel like they need to trust highly or somewhat a charity before giving. And we compare that percentage to the people who say they do or not trust the charity, right? And you would hope that the two percentages align, but there’s a wide chasm between what people feel about how they trust and how they feel that they need to trust before they give. And so we know that this trust problem exists. And I feel like GoFundMe was part of that cultural problem that you’re seeing, which is this decline in trust. But the thing is, I don’t happen to know for sure. And I don’t know how you could know. If institutions are less trustworthy today than they were 2025 years ago or even 30 years ago. In fact, I can tell you specific examples if you want to use my one-off case where I know they are, they were less trustworthy before than they are now. I know for a fact, given some of the places I’ve worked, that they’re way more trustworthy today than they were before, yet we trust them less now than we did in the past and that trust leads to this. desire to shut them down or to shout them out. Now, that doesn’t mean that when we see things wrong, we shouldn’t say something about it. And institutions have never been perfect and when things go wrong, they should be called out to fix those things. But I guess I draw a line when people sort of say, you know, we don’t need to talk to them, we don’t need to deal with them, just shut them down. I’m more in favor of, let’s find out what’s going on first, and if there’s a way to fix this, if it can be beneficial to us, right? If it can’t be beneficial, that’s another story. But if the institution can do things that can be helpful to what we’re trying to do, we should have conversations with them to try to fix it. Because Tony in the end, All nonprofits or institutions. And do we have all of us get everything right every time? No, but we shouldn’t be canceled. We should just fix it. We should just adapt and adjust and fix the problems, not say that, well, because this nonprofit did this thing wrong, they should be canceled. So that’s my only thing. I’m for trying to fix. Now, if an organization doesn’t want to fix it, that’s a whole another story. Then you can talk about canceling. But I’m trying to figure out how we can work to make these institutions work on behalf of people and the causes we care about rather than the alternative, which for me, as a baseline approach doesn’t make a whole lot of sense. What’s the, the John Gardner Award? Who, who was John Gardner? Oh my goodness, Tony. All right, so John Gardner was the founder of Independent Sector. He was also the founder of an organization called Common Cause, right? But more importantly, well, not more important, he did a lot of things. But John Gardner was a conservative, a moderate conservative who was the Head of what was then known as the Department of Health, Education and Welfare for the United States before split off into these three different bureaucracies, right? And he did remarkable work there, working in the Johnson administration. As a conservative. You’ll never see that again in, in the world, right? Never see that again in the world. He also for many years, headed the Carnegie Corporation. Which is, as you know, a grant-making foundation foundation that we have in America, one of the most preeminent and did great work through that. Role as well. Uh, in his later years, he was a professor at Stanford University. And wrote some remarkable treatises on the work of nonprofits and civil society. So, um, they named this award after him to honor people who are leaders of people, institutions, and causes. And so I took a minute to talk about the institutional aspect of that, which is where we seem to be losing a lot of our trust. But it was a great honor to get that award. Thanks to all the people involved. Well, congratulations again. Yeah, outstanding. Yeah, a lot of the institutional loss of trust comes from. Loud voices, uh, who have prominent followings telling us that institutions have been weaponized, corrupted. Uh, etc. and there are a lot of people who believe. If not everything, you know, uh, may maybe everything that prominent people say, they just believe it because of the, because of the messenger, not because the message is, is accurate, it’s just because who’s saying it, and that has eroded venerable institutions like our Department of Justice and our FBI and, and, and others, uh, and then, and it trickles down to. A lack of trust in nonprofits and nonprofits have been targeted as I was saying before that that puts us in that moment that I think GoFundMe uh may have been swept up in, in, in part, in part, not, not all because of the, the moment that it happened, but I think in part um but it does, it also creates. Um, A space for some conversation around how we communicate the value of nonprofits. Because if people aren’t giving and we see the numbers, right? And the numbers don’t tell a whole tale because we know that a lot of that has to do with religious giving. And if you take out religious giving. The numbers are less dramatic in terms of the decline, but it’s flat and it is going down. But the point is, Tony. Shouldn’t we all be having a conversation around how we Encourage The nonprofits to work together to deal with this whole issue of decline and trust. And do we communicate our value to society? Differently so that people find more reason and um we can begin to shift our culture so that giving is what we should be doing. And people are more comfortable giving to these institutions and understanding that, no, we’re not perfect and we’re not always gonna get everything right, but Um, more often than not, more people are going to be helped by these institutions than hurt. And I think that’s what. I’d like to see us begin to talk about. And I don’t have the language right. So don’t hold me to what the language should be. But I do think there’s a, there’s an opportunity. For us to begin talking about. The value of nonprofit organizations, what they mean to society. And how we can help the public show how, how we can show the public that we are trustworthy institutions. I think that’s what I like to see. I would like to see that on a grand scale. I mean, I, I think, I think nonprofits individually, you know, all the 1.4 million. I, I think they’re endeavoring to do that. They’re, they’re doing it with their limited audiences. Their, their, their audiences are the folks that follow them on social networks, they’re donors, they’re volunteers, maybe the community if it’s a local organization, I mean if it’s a large national organization, I, I, you know, I don’t, I don’t, I mean they have more, they have more. They have more people following them, uh, but I, I’m not sure the, the commitment is as deep as it is for a local organization, but But you know that’s each charity doing it individually talking to their constituents. But you know, when, when the messenger has, has millions and millions of followers and it’s a, and, and uh uh a media ecosystem following them around that amplifies the message, it’s, it’s very hard for, for individual nonprofits to defeat this broader, louder, more prominent message and messengers. So, so we need something on a bigger scale is what I’m saying. I’m not, I’m not disagreeing with you at all. We need to be able to match the scale of the negative commentary around the 501c3 community in this country. I don’t know who’s gonna lead that grand scale effort. And, and I think that the ground game is still good. I think what every nonprofit does with their donors is important. And Lord knows our found our AFP colleagues lead with that, right? When, when we go out and talk to donors, we’re sharing that message of trust. Because every member of our association has to commit to a code of ethics. See, most people don’t understand. You can’t just sign up to be a member of AFP. You have to agree to abide by a code of ethics. And we have an ethics committee that will sanction members who are found to be in violation of that code. Yeah, we talked about that so our all of our members lead with that. But what I’m suggesting is, they need help too. I mean, and I think a conversation among foundations and nonprofits, large and small, collectively, maybe through an activity like independent sector or council on foundations and, and, you know, collaborating with AFP and other really vital organizations in our society. To begin shifting this message to something different than what people seem to think we are all about. Will make a difference. And by the way, people still give to nonprofits. But they’re not giving at the level that we would like to see them give, and that’s a huge missed opportunity for our society, especially now when we’re gonna need these organizations to function at a high level more than ever before. It’s time for Tony’s Take too. Thank you, Kate. Just about 2 weeks ago, I had the honor of opening The Sarkey Foundation Regional Leadership Forum. Which is really, it’s a conference, uh, in Oklahoma City. Sarkey Foundation funds only Oklahoma nonprofits. And they invited me to open. The first day with stand-up comedy. So I did a 5 minute set or so. And that was the very first time that I’ve, I’ve spoken at a conference and opened with Stand up. So I, I’m grateful to them for trusting me that. Uh, that I wouldn’t bomb, which I didn’t. Uh, I love how the, you know, the, the comedy. Outcomes are all war related. Oh, I bombed. I killed. I killed, I killed him. I slayed him. So, uh, I killed. It went very well. People laughed at the appropriate moments and uh did not laugh at inappropriate moments. So it all went very well, felt very good when I, uh, I then I then introduced the, uh, the CEO and she gave her opening remarks for the conference. So, I’m just very grateful to them for Trusting, but uh. I would open the their conference. Appropriately and lightheartedly, so they get off to a a fun start. So, thank you, Starkey Foundation. That is Tony’s take too. Kate I think you need to change your Opening now, you are the aptly named host and the podfather and the comedic genius. All right, you’re getting carried away, which I appreciate. Associate producer should have vast enthusiasm for the host. Absolutely number one fan. All right. All right, maybe I will change. No, I’m not, but uh, comedy comedy genius, let’s, yeah, thank you. Thank you, I’ll just stay, thank you for your enthusiasm. We’ve got Beauco but loads more time. Here’s the rest of Another conversation with Art Taylor, with Art Taylor. We need the messaging, you know, at scale. Uh, well, look, you, you know, you did a national message when you were one of the three co-signers of the The, uh, the letter to the letter to America, the, uh, the overhead myth letterhead right when you were CEO of Better Business Bureau and then it was also CEO of GuideStar and um and the CEO of Charity Navigator. I remember Ken Berger was then the Charity Navigator CEO who who was the CEO of GuideStar at the time? It was Jacob, Jacob Jacob, Jacob, thank you. Great. Now, of course, you know, in candid, um, but I mean that was a that was a letter to the, to America. Yeah I think it was addressed to the donors of America or something like that, right? So, I mean, it’s, it’s possible to, we just, we just have to scale the message to defeat the scale of the, the contradictory message that, you know, that we’re a Ponzi scheme. Well, I, I wouldn’t, I wouldn’t go by that, but I, I hear that’s the scale of what people are saying. Well, that was Elon Musk. I’m talking about the scale of, you know, he has millions and millions of followers on X. There’s, there’s a guy with that kind of scale. I’m not, I’m not saying we, we, we have to answer his claim, but, but that’s, that’s the kind of rhetoric that. Hurts the reputation of nonprofits when when we’re called the Ponzi scheme at at grand scale. So we need a grand scale message to not necessarily counteract his individual message, but, but that theme of messaging that that we are bad for the, we’re we’re bad, we’re bad, we’re fraudulent. OK, so what, what you’re pointing out is something that we have to think about, so. There are people who have large followings and have the ability to help shape our culture, right? Maybe some of the answer is to go to them. With a message of. The hope and opportunity that comes from these institutions and see if some of them would be willing to talk along with us. About the importance of giving, right? So, there may be others out there, and I don’t wanna name names, but people who are society sort of looks up to. And I’m not talking about politicians necessarily, but I’m talking about people who are cultural icons in our society. We need to get them on board to use their platforms and megaphones. To begin talking about what good comes from giving. Now it’s a little tricky, right? Because if you’re a multi-million dollar celebrity, It’s easy for you to talk about giving. But When you, when that, that might not translate well to a person who feels like, I don’t have that much to give. Yeah, they can talk about giving all they want, but they’re not in my shoes. How dare they talk about giving like that? I think there’s some risk of that, but I don’t think it’s. I still think it’s worth. Finding some of those greater angels who own cultural megaphones. To talk about the importance of giving at any level. See, that’s the point. It’s not I need just, I need like a $1. I need a quarter. I need a nickel. Every gift matters. No gift is too small. We need participation. We need to take our kids. Um, when we go to buy some food, if we have a little extra, take a can of something and drop it off at a food bank. So our kids. Can see the value. Of giving back to others. We need that kind of thing going on, I believe in our society. So that We can begin to look, look after and take care of each other and develop that common spirit and that common purpose. So that our country can thrive. Without that, I worry that we devolved to. It’s your fault if you don’t have. It’s not always their fault if they don’t have. Usually, it’s a combination of factors that a person finds themselves in need. And I always loved our country because we never turned our back on those folk. And I’ve been one of, by the way, those folks, I was one of those folk. My family didn’t always have all the ends we needed. And in our community, I can remember, go down the street and ask Miss Dorothy for a cup of sugar. Or if somebody was, somebody had died. Nobody had insurance. We took up a collection to bury somebody in our neighborhoods. That’s how that happened. We looked after each other. You get me all going now. But that’s what has to happen. Yeah, we, we have, we, we’ve lost. We have lost the commitment to the greater good. That, you know, it, it, it’s, we, we, we talk about our freedoms, but we don’t counter that with our responsibilities and part of the responsibility. Used to be that we look out for each other we look out for the folks who aren’t as well off as we are and there’s always somebody who’s less well off regardless of who you are. There’s always somebody worse worse off, less well off we we’ve lost the commitment to the greater good. It, it’s become about me and my family. Well, I, Tony, I don’t wanna say all of us, right, uh, but enough of us have you need to try to get it back. 30 to 35%, 35 Myuturist friends are teaching me new, new ways of communicating. All right. They what they’re saying to me is try to avoid the absolute whenever possible. Just try to be as clear about what you’re saying, but avoid the absolute because everything, everything. See, even I say everything. Many things is a better word. are a continuum. Of possibilities. It’s not usually this or that. Our minds are oriented in many cases now to think of this or that, and that can cause us problems. But we should maybe think of the world as more of a continuum of possibility. Where in between the this is or that’s, there’s nuance and people who are in different places on that continuum. So I wanna respect that as much as I can and say that it would be great if we could slide more people from the I’m not interested in giving part to the I am interested in giving part and then further down to the I will give part. And we seem to be losing more people going in the other direction. And that’s what I think I’d like to see us change. I’d like to see us change that. We, we don’t have a, a spokesperson or spokespeople. We, we, as a, as a collective, as a community, a nonprofit community doesn’t have. A voice or several voices out uh in the media, on the influential podcasts because that’s where a lot of opinion gets gets made is on podcasts now. Um, you know, we don’t, so that’s it. We don’t, we don’t have a coordinated. Message, I mean we got 1.4 million messages and there are organizations like AFP and the National Council for nonprofits, Independent sector board source, you know, but a lot of times I think they’re, they’re talking, I mean, you’re CEO of the Association of fundraising Professionals. I think when, when AFP talks, I think you’re mostly talking to fundraising professionals. That’s our, that’s our echo chamber. And, and I’m not criticizing that you have an essential role as a professional organization of professional fundraisers and with the code of ethics, etc. I’m not criticizing that, but a lot of times we’re, we’re talking to ourselves, not the broader community that does doesn’t understand us and, and. In the best case, they don’t understand what we do, it’s kind of a benign opinion they don’t really know and in the worst case, they have a negative opinion of what we do because of. Commentary from, uh, you know, from, from the federal government and people who have big followings. So we gotta get outside our echo chamber. I mean, I, you know, I, I do a lot on LinkedIn, but I know I’m talking to folks in nonprofits. Um, this podcast is for nonprofits. It’s not for the broader community. Yeah, you’re right. You’re right. So it’s not an easy challenge. The, the echo, you know, our echo chamber uh hurts us. We don’t have people talking outside of our. Of our community and that’s what you’re advocating. That’s what I’m saying. I mean like if I could throw out Taylor Swift. People listen to Taylor Swift. LeBron James. Love my people listen to LeBron James, right? Who are uh some of the great football players like uh Patrick Mahomes and Travis Kelsey and Jalen Hurts and these great athletes and. And um entertainers, right? I don’t I’ve seen a lot of movies lately, but you know who I’m, what I’m talking about. Those are people who help shape our culture. And It’s not their responsibility to do it. But it would be nice if we could talk to them about the importance of them doing it. They’re not obligated. They have their own challenges too. But man, what a lift it would be if we could appeal to them. To their good natures to say, you know, We all could use help from time to time. And most of them give a lot of times you don’t hear about it. You don’t hear about it when they give. But what if There was a way for them to communicate this message around giving back to community. And if we could accept that message in the spirit that it was given, which is not to say, look at me, I made it. I’m giving. You haven’t made it the way I am, but I still want you to give. If we could get them to accept the message as It’s just beautiful to be able to give anything you can when you can. So my point is that, wouldn’t it be wonderful? If we could appeal to some of the cultural icons in our society. To encourage them. To do something that they’re not in any way obligated to do. Mhm. Because they have to protect their own brands and images. I get that. But if they would simply look at the good that could come. From a message from them around the importance. Of giving to each other and giving to institutions that can make a difference in their communities. I think that could have a huge impact on the psyche. Cause I think giving, by the way, is It’s kind of an innate thing. Giving to institutions though may not be. Especially when we hear so much negativity around them. But, again, without institutions, how do we get anything done? Because we need to work together collaboratively. And consistently and persistently to solve difficult problems. And that’s what these nonprofit institutions, large and small. National and community allow us to do. Uh, you’re right. I, I, I, I agree that giving is an innate thing like you were talking about growing up and, uh, uh, raising, putting together a little fund to, to, to bury folks in the community. I think at, at that level, I think like helping family and your neighbors, I think that’s innate. Uh, and, and to me that’s a, uh, to me a natural extension of that is giving to nonprofits because they’re just their community, their, their neighbors just at scale, you know, it’s just, it’s a bunch of community members who got together and now they’re now they built a kitchen and now. They feed the hungry or they shelter the homeless or whatever work they do in the community. So to me it’s a natural extension, uh, and I, I think that, you know, I can’t help but impose my own beliefs on, you know, the broader, broader, I agree with you. I agree with you, but, but we’re countering these, this very detrimental, very vocal, very popular, loud voices that are, are hurting the community and that we don’t have a. Coordinated response like you’re describing to to offset that to say no that that’s not here’s here’s what big nonprofits do and here’s what your local community nonprofits do and you know all the folks you named and obviously since I’m a podcaster, I think of Joe Rogan. I mean, I would love, I would love for someone like you to be a guest on Joe Rogan’s podcast to talk to him for two hours. I don’t, I don’t know who he is. I, I’ve heard of him, of course he got the biggest. Megaphone in the world, right? I would love to go on his show and talk about stuff like that. Oh, I would suggest you pitch, I would suggest your, your PR folks, uh, like pitch, you know, let’s talk about the nonprofit sector for two hours, Joe. And, and then I would welcome that. Well, I don’t know anybody there. If I did, I, I’d probably have a bigger audience, but I, I love we know. So we’ll get to them, but I, I think you’re right, that’s that’s a huge, that’s a big megaphone along with all the people, you know, the, the types of, you know, A and B celebrities that you’re talking about, um, we don’t, we don’t, we don’t have that. And the detrimental, the negative charity side. Has a lot of voices like that. They’re, I don’t, they’re not so much entertainers as they are, I think mostly politicians and talking heads that don’t really, don’t even know what they’re talking about often, but they’ve got, Talking points. We need to have, we need to have our talking points by spoken by prominent folks. Well, look, speaking of talking points, I have a class that I gotta teach here in a little bit. Did you know I teach at Columbia University and it’s full of nonprofit management? Well, I teach ethics. I teach governance, and I teach, um. Um, leading and managing nonprofits, leadership and management and nonprofits, I don’t wanna keep you tonight, so I gotta get my talking points together for that. But, but Tony, you call me anytime. Let’s keep, you know, these conversations going. I, I welcome the opportunity to engage with you. You’ve, as I said before, been doing this for so long that you’re part of it, you’re part of our infrastructure now. And um I honor and um respect everything you’re doing. So keep doing it. And uh we will and uh I will certainly have you back. All right, we’ll talk. I, I won’t you, so enjoy your Thanksgiving. Oh, you too, it’s gonna be epic at our house. All the grandkids will be there. Enjoy. All right, thank you, Art. Yeah. Next week, managing money and your banking relationship. If you missed any part of this week’s show, I beseech you. Find it at Tony Martignetti.com. Our creative producer is Claire Meyerhoff. I’m your associate producer Kate Martignetti. The show’s social media is by Susan Chavez. Mark Silverman is our web guy, and this music is by Scott Stein. Thank you for that affirmation, Scotty. Be with us next week for nonprofit Radio, big nonprofit ideas for the other 95%. Go out and be great.