What happened to the <1%?

Working at the intersection of politics and technology, I am asked, and in greater daily frequency, what the hell is going on with political contributions these days?  The good news, we have robust tools to collect and analyze the data. The bad news is, it’s still challenging to elicit meaningful conclusions from this data.  In this discussion, I will present an overview of campaign finance today, outline present misgivings, and future opportunities for solutions.First, it’s important to review the state of the market.  Political contributions are expected to reach $10 billion dollars in 2012 (across Federal, State and Municipal levels of government).  This represents a threefold increase in the past twelve years.  Few industries have managed to triple in size in the past decade; this is certainly one of them.  It is however, important, to keep in mind the context of this growth.  For one, improvements in the distribution and delivery of information (i.e. technology) have reduced barriers to entry, and therefore increased the rate of competition within the space of ‘political marketing.’  To keep up with increased competition, both parties, and their respective machines, have had to dig further and further into barrell for more cash.  For all intents and purposes, this trend will continue over the short term.Second, we must analyze the source of these contributions.  This $10 billion industry collects money from a variety of sources: individuals, Political Action Committees (PACs), Super PACs, 527 Independent Expenditure Committees, 501C3’s (to a limited extent), labor unions, corporations, state and federal party committees.  It’s a cross-section of America.  Simply put, anyone with a vested economic or ideological interest will invest in the process.   However, we often times focus exclusively on the 300,000 super donors (and place even greater scrutiny on the 200 very super donors who have contributed nearly 80% to Presidential PACs, and Super PACs in 2012), and not as much on the remaining donors.  The reality is that 9.7 million americans, or nearly 10% of American households make hard money contributions between $200 and $2,500 per year.  Furthermore, an estimated 20 million Americans make contributions under $200, though identifying them becomes more challenging as donor contribution records are not required for small donations (much to the frustration of data miners like myself); though a good place to start might be the Obama email list – supposedly the largest in the galaxy.

Yet the argument remains: is it ‘fair’ or ‘democratic’ for wealthy donors to have greater freedom of speech vis a vis their contributions?  Does this imply a shift towards a plutocratic form of democracy? And how much longer till the masses arise and simply throw the yoke (think Tea Party & Occupy Wall Street on steroids)?

My belief is that the masses have already arisen, yet it is difficult to see and challenging to comprehend.

Let’s first look at the noise.  When considering influencers in the online skies, we will invariably come across top influencers in wide-distribution media platforms (i.e. Twitter).  Whereas the top 10 influencers in twitter command the following of nearly 20% of U.S. households, the top 10 political donors carry less than 0.002% of U.S. household interests.  Money doesn’t seem to buy too many Twitter friends.  But still, it’s more likely the the ideologies and agendas of the top 10 political donors will have a much larger impact on the lives of those same 20% of U.S. households than would the tweets of the most popular noisemakers.  But yet, we’ve stumbled upon an interesting notion: can social media empower political donors to be greater influencers (e.g. can greater spend also grant you greater clout in the online skies)?

The answer is yes.  The beauty of search and social media is the ability to create links based on affinities.  As individuals, organizations, and companies construct a political genome for American politics, the costs  associated with finding like-minded voters and donors decrease, allowing for greater education and engagement.  We see this with every passing month.  Innovative startups like Votizen, NationBuilder, PopVox, NationalField, AmicusHQ and AngelPolitics, are enhancing the ability to identify supporters for campaigns, and reduce the infrastructure costs of fundraising; in effect, marrying the breadth of crowdsourcing/crowdfunding with the efficiency of marketplaces.

What we will see in the coming years is the opportunity for influencers to also become large donors, and donors to become large influencers.  While risks remain that small donors (e.g. the 20 million Americans who make contributions under $200), will be unable to present large collective interests without the branding of a movement (e.g. MoveOn.org), a PAC, or a celebrity, the reality is that never before have we as a society had the tools to build affinity-based communities around issues, candidates and campaigns.  These opportunities exist as a function of improvements in technology, and the current misgivings of our campaign finance system.

Sources: The Center for Responsive Politics, OpenSecrets.org.

 

By Jesse R. Sandoval

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Political Fundraising: Out from the Shadows into the Social

Two years ago, the conversation at social gatherings frequented by 40- and 50- somethings included the question “why on earth would you share your life on Facebook?!” Yet only a year later, this same demographic was sharing its latest family vacation pictures on Mr. Zuckerberg’s network. Not too long after, the conversation evolved into “why on earth would you join Twitter when you’re not interested in what Lady Gaga had for breakfast?” This year, the same group is tweeting with CNN’s Anderson Cooper, the judges of Dancing with the Stars and, of course, tweeting what they had for breakfast.

This example not only reveals the extent to which we are initially resistant to change, but also demonstrates how quickly our society is adopting social networks and unleashing the power of sharing. Social networking has changed our world in its entirety.

Aside from the 800 pound gorillas in the room (Facebook & Twitter), there are plenty of social networks that have brought great positive disruption to a number of very important fields. One of my favorite examples is Angellist.com, founded in 2008, which serves to match startups with investors. Initially, most investors were hesitant to disclose the investment profile of the type of technology startups they were backing. They were in the “it’s none of your business” camp. Today, investors have realized that sharing their portfolio criteria on Angellist can offer greater opportunities to identify and invest in startups than if this information remained concealed. Furthermore, any respectable angel investor or VC today cannot afford to be absent from this platform, since there could be hundreds of lucrative deals they would miss out on.

Political Fundraising: Ripe for a Social Ecosystem

Political Fundraising is a space mired with inefficiencies. First, it’s not easy to fundraise as a candidate. Second, as a donor, it’s equally cumbersome to make a smart contribution. Additionally, since less than 1% of Americans are active participants in political fundraising, the entire process is a mystery for most citizens.

To get a better sense of things, let’s review the current state of American elections. Currently there are 12,000 candidates that run for office every year in the US raising an estimated $2.9B. The majority of candidates does not understand, nor can hardly afford the arsenal of tools available at their disposal. The result is money left on the table. Nearly all of those 12,000 candidates fail to achieve their full fundraising potential, leaving on the table an estimated $0.60 of every dollar they could have fundraised – a startling figure. Had those been armed with the right and affordable analytical tools, they could have dramatically improved their yields.

Now, why would anyone want the world to see who they support politically? First of all, this information is already public. All political contributions are aggregated by the Federal Election Committee and available for the world to see. Additionally, it is precisely the power of knowing that can help turn a donor into an influencer. Just like those family vacation pictures on Facebook motivated you to take a trip to a far-off destination, so too will seeing the political contributions of your broader professional network influence your own thinking.

Beyond Financial Contributions: A Social Currency for Political Donors

As inefficient as the current process is for candidates and donors, the most dramatic inefficiency is that millions of political donations are conducted in a vacuum. Every contribution has zero influence over other contributions.

A political fundraising social network can turn each contribution into a call-to-action from other donors. A single contribution from a well-respected donor can trigger thousands of contributions from like-minded donors. Contributions made through a political fundraising social network dramatically increase the donor’s influence beyond the amount of his/her financial contribution through his/her social currency.

This year a new technological ecosystem comprised of a handful of technology startups has sprung and is turning political fundraising into a social phenomenon. Next year, the early signs of the political fundraising revolution will be manifested by a tiny checkbox on the donation page of candidates’ websites where donors will not be given the opportunity to opt in to sharing their contribution, but rather to opt-out of sharing.

Present in this revolution is an online political fundraising social network that provides the tools and intelligence to turn candidates into successful fundraisers, and donors into smart and influential forces. It is also the ultimate transparency tool – something worth tweeting about.


By Ricardo Garcia-Amaya and Jesse R. Sandoval,

Cofounders of AngelPolitics, the Political Fundraising Social Network.