What happens when free market dynamics encourage social entrepreneurs to come forward with ideas for pressing environmental and societal problems and you blend that with social networking, Web 2.0 technology and the “wisdom of crowds”? Hint, it's the new model for philanthropy.

Decisions about who should get grants and what kind of projects should be funded are made in an open and interactive process instead of being made in private by boards of experts, socialites and other inscrutable parties. This model is becoming the guiding dynamic for philanthropic activity just as free market economics has become the guiding dynamic for business activity.

I just got an email from a PR person working with a social networking and philanthropic organization that illustrates what I’m talking about. Here’s what she said:

“I'm wondering if you know about an upcoming conference called NetSquared -- a gathering of innovators, thought leaders, and financiers for Web 2.0, social networking, open source, and other trend-setting technologies taking place at Cisco at the end of May.

The highlight of the conference is the NetSquared Innovation Awards, a competition that's best described as  American Idol meets Sand Hill Road meets Mother Teresa.  They've raised $100,000 in grants that will be distributed amongst project proposals submitted by anybody with a good idea for using technology to create or improve socially beneficial tools (that might be used by nonprofits, volunteers, or anybody trying to make the world a better place).

So now they're trying to cull 20 top competitors from the original field of 150 -- and that's where I could use your help.  The top 20 are being selected this week by way of online voting, and I'm trying to get the word out in the blogosphere to get more votes.  I'm wondering if you'd be willing to make a plug for this in your blog or elsewhere.

I'm hoping you have a few minutes to check out www.netsquared.org/  to get a feel for this competition, and, if you agree this is a worthwhile venture, write something that would encourage more people to check it out and vote.  The voting closes Monday, 4/16 at 5:00PM PDT,  FONT-FAMILY: Arial">so timing is a bit critical.”

I checked it out; this is very interesting. Look at the companies who are sponsoring this event; look at the different ideas that social entrepreneurs have come up with; think about how this participatory dynamic can help us come up with new ideas and solve otherwise intractable problems. Hello brave new world.

The problem with classic pyramid shaped hierarchies is that they concentrate the decision making power at the top in the hands of a relatively few people. These people obviously benefit from things as they are (like the fact that they are at the top of the pyramid) so they always decide to maintain the status quo. Funny how that works…

Organizations using the network as their structural model are more adaptive and see new ideas sooner not because people in networks are more intelligent or more virtuous but because everybody in the network gets to participate in the decision making process. That means the people at the center, and people on the fringes, and people who do not have a vested interest in maintaining the status quo.

And this same organizational dynamic works in businesses too. Isn't it about time we give the network organizational model a more serious look?

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