skills that lead to business profits may not be right for successful philanthropic endeavors

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The Dunning-Kruger effect is a cognitive bias that leads relatively unskilled individuals to believe their ability is be much higher than is accurate. The individuals might be highly skilled and successful in other areas, but they behave like novices in new areas outside of their skill zones. The bias was observed experimentally for the first time in 1999, by David Dunning and Justin Kruger of Cornell University.

Many business people mistakenly assume their skills at making money are translatable to the public sector, and they are sometimes surprised, after spending large sums, to find that the reality is quite different. Simply put, laudable social goals might not be achievable with a for-profit mindset. For example, societal missions have no endpoint, in contrast with a business quarter in which profits are measured and reported. This suggests the Dunning-Kruger effect in action.

Nevertheless, there is significant overlap between the spheres. Philanthropic efforts can promote social benefits by investing in human capital through education, nutrition, healthcare and other things that often drive future benefits for society.

At the same time, the size and scale of most businesses, along with greater resources such as financial assets, people, organization, and transportation and supply chains, can amplify the good philanthropic intentions. However, just as it takes a specialist to fly a commercial airliner, there’s a skillset to philanthropy that must be learned.

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Not Naming Names, but…

A great example of Dunning-Kruger in action might be the failed 2010 US$100 million donation made by Mark Zuckerberg, CEO of Facebook, to the Newark, N.J., schools. A 2015 Business Insider article said the reforms Zuckerberg tried to implement “…are widely seen as a failure… .”

The original $100 million became $200 million, but even that wasn’t enough to drive success, according to journalist Dale Russakoff, author of The Prize: Who’s in Charge of America’s Schools? The money went to categories like labor and contract costs, consultants, charter schools and various local initiatives.

“Zuckerberg envisioned the teacher contract reform to be a centerpiece of the reform and contributed $50 million — half of his total donation — to go to working on that cause, wrote Abby Jackson, author of the Business Insider piece.

Zuckerberg wanted to be able to create more flexibility in teacher contracts to reward high-performing teachers and to fire teachers with poor records of student achievement.

However, those types of protections are determined by New Jersey law, and Zuckerberg couldn’t simply come in and change the rules without going through the state legislature to make the changes.

That’s Dunning-Kruger in a nutshell: Not knowing what was possible, Zuckerberg and his team spent a great deal of money essentially — and literally — fighting city hall over personnel issues, and only a minority of their capital on education. In the end, a great philanthropic impulse dissipated for lack of understanding and appropriate planning.

…This Always Worked Before

As recently as a generation ago, the role of philanthropists largely was seen as donating financial assets to good causes. The recipients were…