Philanthropy in the United States has entered a period of unprecedented and transformational change. Like the titans of the industrial revolution a century ago, the leaders of today’s information revolution are putting their own mark on the social sector. Carnegie, Ford, and Rockefeller created the idea of the large, professional private foundation—an idea that underpins today’s philanthropic and nonprofit work. Their modern counterparts are bringing entrepreneurial acumen to philanthropy, demanding measurable results, and carefully assessing a variety of social investments.

But consider how most individuals and traditional foundations even now make donations to charity. Such gifts usually come in response to a phone call or a letter appealing to some emotional tie. Once a donation has been made, it is often repeated year after year out of habit. People considering a sizable gift might receive the attention of a development officer, who will work to connect their charitable impulses with the needs of the organization they support. The small number of truly wealthy and generous donors can call upon the assistance of highly educated and dedicated private-foundation officials. Yet few donors try to find out if their donations had any measurable impact on the problems they were trying to...