Bring Your Hard Heads to Social Investing

Last week’s second annual Social Impact Exchange conference was filled with high energy, creativity, and a sincere dedication to improving people’s lives by scaling up evidence-based or high-performing social interventions. While many in the room represented philanthropic foundations, individual donors have been and are still the largest source of funding for the nonprofit sector. How can we create markets that successfully tap these sources of wealth for greater social return?

Traditionally, as Brian Walsh from Liquidnet shared in his presentation on “Markets for Good,” donors have been led by their hearts, giving to organizations that share their values, to those social problems they want to address or to those institutions to which they feel they owe a personal debt. One donor might care about how to improve civil society. Another donor might care about how to cure a disease by which they have been personally affected. And still another donor might care about eliminating poverty.

But what if the starting point was more empirical? What if, while leading with their heart, more donors could be compelled to invest with their heads? “Where will I have the biggest impact?” they could ask. “How will I get the most return on my investment of charitable dollars?” And, as was the conference’s focus, “How can I invest to scale up an evidence-based intervention?

Why should social investors support evidence-based interventions? With the huge problems we face in this country and, indeed, in the world, we need to target our scarce social investments more effectively. Let me give you an example. In her 2010 TED talk, Esther Duflo of MIT talked about evidence from an experiment to encourage immunizations in India. Simply providing free immunizations for children ages 1-3 at a clinic resulted in only 6% of children being immunized. Holding immunization camps (with advertised times and places dedicated to immunizations) raised the rate to 18%; and adding an incentive of free lentils (costing $1) for getting their child immunized raised the rate to 39%. Nevertheless, the incentive intervention cost half as much as the camps alone. Investing in the latter intervention is better targeting our social investments. It’s a no-brainer: getting more for less.

Organized philanthropy can help these individual social investors by developing evidence around specific interventions – we can provide the risk capital. The investments the Robert Wood Johnson Foundation made in the Nurse Family Partnership, starting in the 1970s, are a well-known example of this. The Nurse Family Partnership has been shown to reduce child abuse and neglect. Let’s scale successful interventions like the Nurse Family Partnership. Most importantly, we don’t want others to waste precious resources replicating solutions that aren’t shown to work.

New tools are being developed to aid donors in their efforts to focus their funding on evidence-based interventions. For example, the Social Impact Exchange has developed a beta version of a due diligence tool that aims to help them identify those that are in the best position to scale for impact.

Social donors or investors need to bring the hard heads that they used to accumulate wealth to the giving of wealth. We will all be better off if the money, as Andrew Carnegie said, is distributed wisely.

Guest blogger David Colby is Vice President, Research and Evaluation at the Robert Wood Johnson Foundation.