As brought to our attention by NextBillion, Stephen J. Dubner and Steven J. Levitt, authors of Freakanomics, published an article in the NYTimes yesterday entitled, “Bottom Line Philanthropy,” in which they discussed the need for applying business models to philanthropic organizations for the purposes of sustainability and impact.
The article highlights two individuals – Rafe Furst of what is informally called the Cure Cancer Annuity Fund and Brian Mullaney of Smile Train. Furst’s model posits that effectiveness in the social sector lies in the incentivization of innovation through prizes and profits – in this case, for the purposes of curing cancer. As stated in the article, “inspired by the X Prize Foundation’s sponsorship of innovations in space travel and other realms”, Furst conceived of a “charitable business model” – the Cure Cancer Annuity Fund – which employs a two pronged, incentive-based approach to cancer research. The Fund aims to not only benefit donors in the form of annual returns, but researchers as well, who stand to win a prize of $10 billion for finding a cure for cancer.
The second example mentioned in the article is that of the Smile Train, which employs local resources, social marketing strategies, innovative technology, and cash incentives for the purposes of administering cleft lip or palate operations in developing countries. As stated in the article, “Smile Train works as a charity because it is run like a business”:
Fixing a child’s cleft lip or palate is a relatively cheap procedure with outsize payoffs: cleft children in many countries are ostracized and have a hard time going to school, getting jobs and marrying, and the surgery reverses those disadvantages. Indeed, when pitching a reluctant government, Mullaney refers to cleft children as “nonperforming assets” who can soon be returned to the economic mainstream. He fights bad incentives with better ones: when Smile Train learned that midwives in Chennai, India, were being paid off to smother baby girls born with cleft deformities, Mullaney started offering midwives as much as $10 for each girl they instead took to a hospital for surgery.
Smile Train has also harnessed technology to create efficiencies in every aspect of its business, from fund-raising to charting patients’ outcomes. It developed surgery-training software that helps educate doctors around the world. There are high-tech quality-control measures: using digital imaging, a Texas cleft expert grades a random sample of operations performed by Smile Train doctors around the world, in order to know which surgeons in, say, Uganda or China need more training. These are the sort of innovations that likely make Smile Train one of most productive charities, dollar for deed, in the world. Over the last eight years, Smile Train has performed more than 280,000 cleft surgeries in 74 of the world’s poorest countries, raising some $84 million last year while employing a worldwide staff of just 30 people.
Both examples highlight the potential for employing innovative business practices for the purposes of creating sustainable, scalable social organizations. In the end, the purpose of any philanthropic organization is to eventually become purposeless. In the case of Smile Train, which is currently at the “historic break-even point” of “performing more operations each year than the number of children born each year in developing countries with cleft deformities”, this strategy seems to be working.