The Principled Agent

Thoughts on development economics and impact measurement

Archive for the ‘Uncategorized’ Category

Catalyzing transparency in nonprofit sector

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Like many, I believe that public transparency is critical to a well-functioning development system. What do I mean by public transparency? To me, public transparency is making sufficient objective information available in a comprehensible format about the operations of our organization (program, financial, etc.) so that outsiders can understand an organization’s work and verify their assertions about effectiveness and efficiency for themselves. It represents cooperating fully with the highest integrity to allow outsiders to draw their own conclusions. While public transparency won’t solve every problem, it will help nonprofits improve their performance and it will help higher-performing nonprofits to grow. Given this potential, why is it so difficult for Givewell to find nonprofits that meet even basic standards of public transparency? Read the rest of this entry »

Written by Chris Prottas

February 11, 2015 at 2:19 am

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Honey, I shrunk the Social Impact

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Lee Crawfurd, who you may know has the best economics blog (previously) in South Sudan, recently highlighted a study that assessed the impact of a job placement program in France. The paper provides an excellent case study in how perceived impact can disappear, highlighting the importance of sound estimation of what would happen without an intervention, i.e., the counterfactual.

The program provided assistance to jobseekers, and depending on how you measured your impact, you would have received a very different story. Read the rest of this entry »

Written by Chris Prottas

January 30, 2013 at 11:28 pm

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Quantifying Gates Foundation’s Brand Equity

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IPA continues to find inventive new ways to use randomized controlled trials to better our understanding of giving and development. While usually the focus is on how well programs help their beneficiaries, a recent study explores how individual giving is affected by a matched donation campaign. With the cooperation of the Gates Foundation and Technoserve, Dean Karlan and John List tested the impact of a matching grant solicitation on individual giving (with a solicitation with no mention of a match as the counterfactual), as well as the impact of naming the Gates Foundation as the matching donor  (with an anonymous grant match solicitation as the counterfactual). The former test was directed at prior donors while the latter at prospective donors. The offer was a $3:$1 match.

Besides identifying the income generated by a matching program, this study is an important step in quantifying the brand equity of organizations like the Gates Foundation.  That is, what’s the value of the reputation that the Foundation has established in the field. For example, while the average return was $0.57 for the match offer from an anonymous donor, the return was $0.81 for a Gates grant, a 42% increase.  It’s worth noting that the populations of the two different tests in the study are not identical: one solicited donors that had previously given and the other solicited individuals who had not previously given. Still the pair of experiments allows for at least an intuitive understanding of the Gates’ value-add. Further by examining how this reputational impact varies by donor type, Karlan and List find that there are significant distinctions in reputational value between different audiences.

The Gates brand is an asset with significant value, and this study clarifies one part of that value. The business world has long observed the value of experiments for market research purposes, perhaps this is a first step for the philanthropic world in similarly leveraging experiments to better understand the value of their less-tangible assets in order to support better-informed management.

Some of the key results:

Gates reputation test: Solicitations targeting non-prior donors with and without Gates named as the 3:1 match donor
The total revenue per solicitation was $0.81 for Gates-named solicitations and $0.57 for anonymous-match solicitations. In the match period, the revenue per solicitation in the $0.29 with anonymous matching, and $0.41 with Gates named (40% increase).

Matching test: Solicitations targeting prior donors with and without Gates 3:1 match offer
Total revenue per solicitation during and after the match period was $0.64 for the Gates match solicitations, versus $0.29 for the no-match solicitations. Average revenue per solicitation during the match period went from $0.15 to $0.28 with the Gates match (81% increase). This was driven largely by an increase in the probability of a gift, with no change in size.  It also increased the likelihood of giving again after the matching program ended, as the likelihood of a repeat gift increase from 0.24% to 0.46%. This suggests that the increase in giving was driven by the perception that the organization was of a higher quality due to the Gates endorsement, rather than the matching program itself.

Heterogeneous impact on “poverty-oriented” charities
The study finds that the Gates brand has a larger impact on individuals who have previously given to poverty-oriented charities. Karlan and List speculate that this may be because the effect of the quality signal is greater with individuals who know more about the sector and presumably the importance of the Gates Foundation.

Disclaimer: This is based on a quick read of the article, please let me know if there are any errors or misinterpretations of the results.

Written by Chris Prottas

April 3, 2012 at 4:42 pm

Posted in Uncategorized

Impact-driven Performance Dashboard for One Acre Fund

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After writing up some initial thoughts on One Acre Fund’s dashboard, I thought I might offer my own vision of a performance dashboard for the Fund. Incorporating the performance information on the website and the 2010 financial statements, I was able to piece together an analysis of the cost-effectiveness of the organization in 2010, which I present in the dashboard along with some of the key drivers of program effectiveness and efficiencies. I chose to focus on 2010 because I could get the financial statements easily for that year through the website. Read the rest of this entry »

Written by Chris Prottas

March 4, 2012 at 10:49 pm

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Managing to Impact: One Acre Fund’s Performance Dashboard

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Dave Algoso recently wrote up an overview of One Acre Fund’s performance dashboard that got me again thinking about how we can create dashboards to both support performance management and communicate value to donors and partners. I have a lot of respect for One Acre Fund’s work, it’s efficiency, impact, and, as Dave notes, emphasis on evidence-based program development. Certainly, from the outside, it appears that the bundled services have been well chosen to meet the needs of farmers while minimizing the subsidy required. Read the rest of this entry »

Written by Chris Prottas

March 4, 2012 at 10:25 pm

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Secondary markets key for Impact Investing growth

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While Mission Markets and Impact Investment Exchange Asia have pioneered private platforms for sourcing and channeling deals to investors, GATE Impact now plans to provide a trading platform that will allow investors to trade shares of the companies listed, much like any other stock exchange.

President William Davis is focusing on investors—mostly big institutions—that can bring their impact investing portfolios onto the platform with them. At launch, Davis says, GATE Impact will list available impact investment deals of between $500 million and $1 billion. By comparison, the social enterprises on Asia IIX’s Impact Partners platform have sought to raise a total of about $70 million. [Source]

But do impact investments need “hot money”? It’s hard to know what the trading behavior would be like on such an exchange, but there is an advantage to being a private company, the ability to look long- rather than short-term chief among them.

I do think a secondary market will be very important to the industry, especially given the fear of many that there will be limited opportunities for exits. At the same time, I wonder if what the industry needs is an active private equity secondary market, with secondary buyers purchasing stakes in existing investments or funds themselves, allowing the initial investors to achieve at least partial exits.

Given the concern about exits, I would think that a secondary buyer could play a catalytic role in the industry, increasing the confidence of concerned potential investors and providing exits for initial investors that will allow them to make additional investments in the space. The role of the secondary buyer is indeed to provide an exit for the initial investor before the investment itself achieves an exit (e.g., M&A, IPO, etc.), and given the patience required for “patient capital” impact investing, the off ramp provided by secondary buyers could prove crucial to getting mainstream institutional investors on board. Unlike the proposed stock exchange, it won’t expose the businesses themselves to hot money.

In addition to a secondary private market, capital could be channeled through a trading exchange that listed social investment funds rather than the investments themselves. There are legal concerns given the non-profit status of many social investors, but it’s an idea worth considering.

The $400 billion to $1 trillion question is how to translate investor interest into active investments. An active secondary market and a platform for funding the funds may help (responsibly) tap those resources.

If you have any thoughts or comments, please send me an email at: cdp283 at nyu dot edu.

Previous Posts on the challenge of Social Performance Measurement:

Written by Chris Prottas

January 8, 2012 at 3:18 am

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Impact Investing in Rigorous Analysis

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In a recent interview with Fast Company, Dean Karlan noted:

The social entrepreneurship world is in a weird spot, to be honest with you. It’s a world full of rhetoric about impact investing, yet I have very rarely seen an investor actually take that seriously. When you look at the actual analysis it lacks rigor.

Ouch. Some readers will surely dismiss Karlan as a ‘randomista’, but his critique is fair, and one that I have made before. Read the rest of this entry »

Written by Chris Prottas

August 12, 2011 at 3:11 am

Posted in Uncategorized