Thanks, Jason â this is exactly the kind of scrutiny I think the idea needs.
On your core point: I basically agree with your descriptive read. Looking at Thankyouâs ~4â5% donate-able margin or Newmanâs ~5% donations on ~5% net margins does not scream âthese businesses are crushing the for-profit competition.â When I talk about large profit uplifts, Iâm not claiming we already see that in their published numbers; Iâm saying the mechanism (thin margins + modest stakeholder advantages) could plausibly generate big differences if we ever set this up deliberately and at scale. What we actually have today are a handful of pioneers operating under lousy conditions: low category awareness, no shared certification, and a chronic capital misfit (too âweirdâ for normal investors, too âbusinessyâ for most philanthropy). In that world, youâd expect âsurvive and sometimes do well,â not âobvious margin dominance.â
I also think youâre right to flag survivorship and the Paul Newman effect. Newmanâs Own probably got a brand tailwind few founders can replicate, and we donât have good public data on the PFG attempts that fizzled. Thatâs partly why the article opens by saying âthe basic math is compelling, what we lack is rigorous measurement.â Iâm using Thankyou/âNewmanâs as existence proofs (âthis can work at allâ), not as clean evidence that the multiplier is already realized in the wild.
On the Kraft question and capital: I donât think the story has to be âsmall PFG beats the global leader on day one.â The more realistic path I have in mind is stepwise:
First, PFG companies grow with philanthropic and mission-aligned capital in niches where capital requirements are tractable and stakeholder preference is strong (ticketing, insurance distribution, hated-fee services, values-expressive categories, etc.). At that stage, the relevant comparison really is similarly sized âprofit-for-yachtâ firms, not KraftHeinz.
Then, if they show normal or better cash-flow performance, they can access ordinary credit markets. Banks and lenders care about coverage ratios and default risk, not whether residual profits go to a foundation or to a family office. A PFG firm with solid EBITDA and a boring business model can still borrow to expand, even if 100% of distributable profits ultimately go to charity.
Only much later do we get to the level where youâre buying or competing head-to-head with a Kraft-scale incumbent. At that point, youâd likely be using a mix of philanthropic equity, retained earnings, and conventional debt â not trying to fund a $50B play entirely out of grants.
So Iâm not claiming âPFG firms are already out-earning Kraftâ or that we have tidy margin graphs to prove a large edge. Iâm claiming: (a) we have decent evidence that stakeholder preferences exist at parity and can matter; (b) the margin arithmetic makes it at least plausible that, in the right contexts, this could translate into big differences in distributable profits; and (c) given that, itâs rational for philanthropists to run some careful, sector-specific experiments rather than either assuming PFG canât compete or assuming it already does. If those trials show no advantage once you control for capital and sector, Iâll happily update. Right now, the main thing Iâm arguing against is staying forever in exactly the âanecdata vs intuitionâ uncertainty youâre highlighting.
Thanks, Jason â this is exactly the kind of scrutiny I think the idea needs.
On your core point: I basically agree with your descriptive read. Looking at Thankyouâs ~4â5% donate-able margin or Newmanâs ~5% donations on ~5% net margins does not scream âthese businesses are crushing the for-profit competition.â When I talk about large profit uplifts, Iâm not claiming we already see that in their published numbers; Iâm saying the mechanism (thin margins + modest stakeholder advantages) could plausibly generate big differences if we ever set this up deliberately and at scale. What we actually have today are a handful of pioneers operating under lousy conditions: low category awareness, no shared certification, and a chronic capital misfit (too âweirdâ for normal investors, too âbusinessyâ for most philanthropy). In that world, youâd expect âsurvive and sometimes do well,â not âobvious margin dominance.â
I also think youâre right to flag survivorship and the Paul Newman effect. Newmanâs Own probably got a brand tailwind few founders can replicate, and we donât have good public data on the PFG attempts that fizzled. Thatâs partly why the article opens by saying âthe basic math is compelling, what we lack is rigorous measurement.â Iâm using Thankyou/âNewmanâs as existence proofs (âthis can work at allâ), not as clean evidence that the multiplier is already realized in the wild.
On the Kraft question and capital: I donât think the story has to be âsmall PFG beats the global leader on day one.â The more realistic path I have in mind is stepwise:
First, PFG companies grow with philanthropic and mission-aligned capital in niches where capital requirements are tractable and stakeholder preference is strong (ticketing, insurance distribution, hated-fee services, values-expressive categories, etc.). At that stage, the relevant comparison really is similarly sized âprofit-for-yachtâ firms, not KraftHeinz.
Then, if they show normal or better cash-flow performance, they can access ordinary credit markets. Banks and lenders care about coverage ratios and default risk, not whether residual profits go to a foundation or to a family office. A PFG firm with solid EBITDA and a boring business model can still borrow to expand, even if 100% of distributable profits ultimately go to charity.
Only much later do we get to the level where youâre buying or competing head-to-head with a Kraft-scale incumbent. At that point, youâd likely be using a mix of philanthropic equity, retained earnings, and conventional debt â not trying to fund a $50B play entirely out of grants.
So Iâm not claiming âPFG firms are already out-earning Kraftâ or that we have tidy margin graphs to prove a large edge. Iâm claiming: (a) we have decent evidence that stakeholder preferences exist at parity and can matter; (b) the margin arithmetic makes it at least plausible that, in the right contexts, this could translate into big differences in distributable profits; and (c) given that, itâs rational for philanthropists to run some careful, sector-specific experiments rather than either assuming PFG canât compete or assuming it already does. If those trials show no advantage once you control for capital and sector, Iâll happily update. Right now, the main thing Iâm arguing against is staying forever in exactly the âanecdata vs intuitionâ uncertainty youâre highlighting.