Non-profit Paradox

A group never admits they're wrong. In the non-profit setting, there's no real and objective feedback from reality, and the group is prone to be delusional and celebrate everything as a victory.

Assumed readers: People who are curious about the hype on non-profit.

Yesterday I stumbled upon Naval's blog. Naval is the co-founder of AngelList, a prolific tech investor in a company like Twitter, Uber, and more. His post about Groups Never Admit Failure is interesting.

Groups never admit failure.

Naval shared the idea that it's rare to find groups that said, "We thought A, but the answer's actually B." A group will never admit they were wrong because it’s painful process for our brains.

It makes sense. It's hurtful for our brains when we realize our reality is no longer real. Like when we lost our pet—it’s painful.

Here’s the interesting part: Naval was once work with the non-profit foundation as a board. He found that no matter what the foundation did, they would declare victory. Every project was victorious. People back-slapping each other. But he realizes nothing ever got done. This is a tricky part of a non-profit setting.

This is because there is no objective feedback for non-profit organization. Everything they do is for the social cause—so they couldn't fail. They are prone to being delusional in their thinking.

On the other hand, a for-profit organization have objective feedback from reality. If your product sucks, no one wants it. You see your revenue down, run out of money quickly, and shut down. Naval even argued that the best way to change the world to a better place is by doing it with for-profit entities.

The paradox

It’s a paradox.

People who work in a for-profit get sick of the corrupted thinking. They hate it when the company is focusing on the profit solely. It is not desirable. The company lose focus on creating value for customers and make the world better. Not a fun place to work.

So, people from that environment usually go to the non-profit route. They feel they don’t have to worry about monetary aspect and, theoretically, they can focus on delivering value for the people they serve. But then, the issue Naval mentioned. The success becomes fuzzy in the non-profit setting and celebrate everything as a victory.

It’s tricky.

Naval argued: Ironically, for-profit businesses arguably the best path to change the world to a better place because for-profits have the feedback from reality. Read Naval's post.