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    Polycentric Voluntarism Unbound: The Case for Nano Nonprofits

    By Robert E. Wright

    Americans tend to assume that bigger is better, and they are often right. But in many instances the job calls for a step ladder, not a crane. Businesses range from billion-dollar multinationals to sole proprietorships, and governments from the supranational United Nations to tiny hamlets. Nonprofits also come in various sizes, from those with thousands of employees to those with one or even no employees.

    While many herald local governments and business proprietorships, few people appreciate nano nonprofits and many disparage them for being ineffective or inefficient. Yet they abound. According to the U.S. Bureau of Labor Statistics, 501(c)(3) nonprofits in America in 2017 numbered 166,046. Of those, 64,806 had fewer than 5 employees and another 28,999 employed between 5 and 9 people.

    The nano nonprofits’ share of total nonprofit employment and wages is tiny, but that does not mean that they are inefficient or unimportant. In fact, the least-efficient nonprofits may dwell in the middle of the sector, where insufficient scale thwarts some and mission creep infects others.

    In this vast middle ground, some nonprofits hire bloviating leaders with bloated salaries and inhumane human resources personnel, whose main task is to make sure that layers of unnecessary middle managers behave themselves with the volunteers. Many middling nonprofits sprang from humble roots, achieved some success, and thought they had to scale up. So they took on all the trappings and attendant costs of larger institutions, but never achieved sufficient funding to achieve scale economies. They spend goodly sums, but do not necessarily “move the needle” as much as much smaller organizations do, even in absolute terms.

    Maybe some of those middle-sized nonprofits should have received more donations, but for whatever reason did not. In many cases, though, the world would have been better off if they had remained nano-sized, laser-focused on one core mission, and less subject to funding shocks.

    The Legal Insurrection Foundation, for example, does just one thing, sponsoring a blog and newsletter that provide news and analysis related to government policies, especially higher education policies, that do not make national headlines. Just a handful of employees provide that valuable service to its grateful readers, which number in the hundreds of thousands per month.

    Similarly, Historians Against Slavery focuses exclusively on educating people about slaveries, past and present, via conferences, books, a speakers’ bureau, and social media. It has a “working” volunteer board and zero employees. It has never spent more than $15,000 in a year, which keeps paperwork costs low. It outsources most functions not directly related to its mission and was able to hibernate at low cost during the pandemic.

    COVID also didn’t kill the International Insurance Foundation (IIF); the death of its main employee, Robert J. Gibbons did it in. But for over two decades, Gibbons and the IIF fulfilled a niche mission, helping to educate insurance executives and policymakers in emerging markets, and did it well.

    Many nano nonprofits die along with their founders, or other key movers and shakers. They can be vulnerable to other types of external shocks, too, though their small footprint can render them nimble in the face of changing conditions. The fact that nano nonprofits are more likely to close up completely than to linger endlessly is a good thing, from an overall efficiency standpoint. The much-maligned but once hugely popular and well-endowed American Colonization Society, for example, was able to cling to corporate life into the 1960s although its main mission, sending ex-slaves to Liberia, ended a century earlier.

    Another very successful nano nonprofit, the Federation of Women Shareholders in American Business (FOWSAB), petered out along with its founder, corporate activist and NBC radio show host Wilma Soss (1900-1986). The subject of the new book Fearless, Soss formed FOWSAB in 1947 to educate female, and later male, individual investors and to agglomerate proxy ballots for use in corporate elections. It had several hundred dues-paying members at its height, mostly from the greater New York City metro area. But it never employed more than a few people, the most important of whom was Soss, who served as “Chairma’am,” PR consultant, and educational programs coordinator. Volunteers and outside contractors did the rest.

    By the early 1980s, FOWSAB was moribund, but rightly so as the 1970s witnessed the ebbing of the postwar small investor invasion of the stock market that Soss had helped to bring about. Most investors had switched to investing via mutual funds by then.

    Moreover, individuals who still preferred to buy at least some stocks directly had several other options, including the American Association of Individual Investors (AAII). Unlike FOWSAB, AAII was able to scale and outlast its founder. It claims to have helped two million investors since its inception in 1978, based on a membership model similar to that of FOWSAB. Unlike FOWSAB, however, its founder was fully committed to enlarging the organization, which included building robust local chapters throughout the country. FOWSAB also experimented with chapters but Soss was spread too thin with her corporate activism and national radio show to do much more than hope they would spontaneously arise.

    Clearly, not all nonprofits should remain, or even start, at the nanoscale. But nano nonprofits remain a focused and efficient part of the Third Sector, a large, but unfortunately largely forgotten, part of America’s economy and civil society. I detail the rise and demise of America’s original system of polycentric voluntarism in my forthcoming book, Liberty Lost (AIER 2022).

    The Third Sector today is not nearly as large or as vibrant as it would be if governments at all levels did not intrude into almost all aspects of individual’s lives, taking money from skeptical or unwilling taxpayers to fund the imposition of broad programs and mandates that often exacerbate social problems instead of ameliorating them in the localized, nuanced, flexible ways that nonprofits do. If Americans can defund their governments, America’s system of polycentric voluntarism will thrive once again as all nonprofits, large and small, compete for donor resources independent from government budgets and influence. By restoring the ability of its citizens to solve their own problems in their own ways, the American nation will remain imperfect, but a far better place than it is currently.

    Robert E. Wright

    Robert E. Wright is a Senior Research Fellow at the American Institute for Economic Research. He is the (co)author or (co)editor of over two dozen major books, book series, and edited collections, including AIER’s The Best of Thomas Paine (2021) and Financial Exclusion (2019). He has also (co)authored numerous articles for important journals, including the American Economic ReviewBusiness History ReviewIndependent ReviewJournal of Private EnterpriseReview of Finance, and Southern Economic Review. Robert has taught business, economics, and policy courses at Augustana University, NYU’s Stern School of Business, Temple University, the University of Virginia, and elsewhere since taking his Ph.D. in History from SUNY Buffalo in 1997.



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