socially marketing

Using impact metrics to understand the social sector can take many forms, as seen in these current efforts:

performance measurement: evaluating non-profit effectiveness by measuring their outcomes.

outcomes taxonomy: creating a master list of non-profit outcomes to be used as a sector-wide standard for comparison.

social capital: broadening the definition of capital to capture environmental and other social values.

socialmarkets depends on all these trends, and also pushes them a little further into unknown territory.  This is especially true for the social capital model, like when we mix up ‘regular’ dollars (e.g. a donation to a charity) and social dollars (e.g. the SROI a donation produces).

The name socialmarkets itself goes a long way towards explaining what we do: applying the market model to the social sector.  We believe there are potential benefits to applying economic market principles to the non-profit sector, which is after all, itself an economy.

We do not believe that markets and non-profits are a match made in heaven, and our goal is not to force one onto the other.  Rather, our goal is to explore the boundaries of where the market and social sectors can come together constructively, and where they can’t.

This exploration includes stretching some of the classical market vocabulary.  Take ‘currency‘, for example.  Currency is the very foundation of modern economies, offering a neat method of assigning value to things, and of facilitating their exchange.  Dollars, euros, rubles and the like comprise the hard currencies that make traditional economies go around.

socialmarkets suggests an economy based on the soft currency of SROI (Social Return on Investment.)  Social currency is no good for shopping at the mall, but is excellent for capturing and communicating the social value of non-profit work.

Currency actually flows quite naturally in socialmarkets, but price does not - even though the two terms seem closely related.  We capture the value that non-profits add to society, in the form of social currency - which is not quite the same as coming up with a price.  This distinction illustrates how social markets don’t always mesh neatly with traditional ones.

Traditional economic markets depend on a neat line between profit-maximizing producers and penny-pinching consumers, to guide the market’s invisible hand towards a compromise called ‘price’.

Social markets are more complicated.  The line between the producers and consumers of social capital are fuzzy, and the currency that flows between them is more nuanced than plain dollars.

We are so used to traditional ‘prices’ that we forget how fickle they actually are.  From real estate on a global scale, to a cup of coffee on our own corner, prices often move along surprising trajectories.  There is an entire field of economics devoted to studying (and ironically, rationalizing) the irrational behaviour of prices.

This helps remind us that the price of any thing is just a snapshot of how people value that thing… which suggests a useful definition for social return of any given outcome: a snapshot of how valuable people believe the outcome to be.

When we have more experience with social markets we should be able to make better sense of how price - and other economic jargon - translates into the social economy.  For starters, we can recognize that the boundaries between social and economic currency aren’t all that well-defined in the first place.

The basis of socialmarkets’ brand of social capital is the metrics we employ to approximate social value.  For starters, we try to keep up with the social science on non-profit outcomes and their social value (see our research section here.)

The database of such values is large and growing, and we are grateful for it.  Every study that contributes data on the social return of a meal served to the hungry, on medical treatment to the uninsured, etc. helps us more accurately produce SROIs to associate with the related project listings on our site.

But the database of outcomes and their social values is not nearly comprehensive.  This would prevent us from compiling SROIs for many non-profits, if we didn’t have the help of our crowdsourcing mechanism.

One of the most important functions of socialmarkets is capturing our users’ opinions on which outcomes they value most.  For better or worse, opinions are never in short supply, so our own database of user input can cover the entire non-profit space.

Ideally we would have both subjective and objective data available for the SROI calculation of a given project, but we know this won’t always be the case.  In any case, the amount of available data is significant.  Like in any market, size matters in socialmarkets.  The more players in the market, the more likely we can mitigate gaming, bias and other distortions that prey upon markets with few participants.

The wisdom of crowds presents another argument for more crowdsourcing data. Consider a classic guessing game, like when a random crowd is asked to guess the number of jelly beans in a jar, or the weight of a prize bull.  It turns out that while the average guess is off by a wide margin, the average of all guesses becomes more accurate as the number of guesses grows.  The bigger the crowd, the wiser they seem to be.   This is a fascinating emergent property of society, and it certainly applies to socialmarkets - at least to the extent we can reconcile votes on social priorities with guesses at bean counts.

The bottom line is that socialmarkets runs on social metrics, and is both producer and consumer of the data it needs.  Using the data generated by our own users, and by others doing related social science, we are piecing together a truer picture of the costs and benefits of social projects.  Ultimately, this will enable us to see how our social investments can generate the greatest social returns.

You are not a bona fide non-profit in this country until the IRS says so with 501(c)3 certification… and we just got ours!  Previously we were partnered with a fiscal sponsor (our old friends at GivingNet) but that was a stop-gap measure until obtaining non-profit status on our own.

There are several advantages to being a non-profit, some more obvious than others.  The most well-known advantage is the ability to accept tax-deductable donations.  In a similar vein, there are discounts made available to non-profits to help lower their operational expenses.  While we are happy to be able to take advantage of such benefits, non-profit status means much more to socialmarkets.

We are serious advocates for increased transparency in the entire social sector, within which non-profits are an ideal place to start.  Leading by example is a great way to demonstrate this advocacy.  Aside from mandatory transparency measures such as the Form 990 the government requires each year, socialmarkets itself is a useful platform for increasing both transparency and accountability.

If we are going to walk our talk, then socialmarkets needs to be listed on socialmarkets.  Like any other non-profit claiming to be worthy of funding, socialmarkets should present its mission, programs, and expected outcomes… as well as the social returns (SROI) related to those outcomes.

Our hope is that our own work, along with the collective input of the socialmarkets community, will ultimately reveal tremendous social return on investment in the socialmarkets enterprise itself.  But no matter what the outcome is, we know that defining and measuring that return is a tremendously valuable exercise.

There are lots of folks who aren’t excited about social capital in general, but even within the socap community, social currency can be a hard sell.  I think some of this resistance would go away with a better understanding what “currency” is.

In its most basic form, currency is simply a mechanism for capturing value.  So in theory, if you accept that the social sector creates value, it’s not a far stretch to accept a currency that captures it.

Currency is tightly associated with money, because that is the implementation we are most familiar with.  However, the SROI socialmarkets promotes is only one of many variations on the currency theme.

The city of Ithaca, New York (my home as an undergrad) has been using their own currency for years now.  That currency is denominated in HOURS, based on the value of one hour of work, and used to supplement or even replace dollars by hundreds of local businesses and thousands of local residents.  HOURS is that community’s own creation, and they are rightfully proud of it.

Like any currency that is not directly backed by a “hard” commodity such as gold (including, since 1971, the U.S. dollar) HOURS and SROI are really just collective acts of faith.  There is nothing tangible behind these currencies or the economies they empower, which helps explain why dollar bills are inscribed with “In God We Trust” and HOURS bills with “In Ithaca We Trust”.  SROI bills don’t exist (yet), but the inscription I would recommend for them is “In Us We Trust”.

SROI is as real as we want to make it.  We may never be able to accurately capture the social benefit of reducing greenhouse gases, immunizing children or feeding the hungry… but carbon credits, health care savings and calorie counts are valid and accessible pieces of their respective puzzles.

Happily, SROI is more nuanced than the relatively small set of credible outcomes data currently available.  If value is ultimately what we collectively think it is, then capturing our collective thoughts is the ultimate path to SROI.  The most significant outcome of the socialmarkets experiment would be to make that happen - to provide a platform from which our collective wisdom can define social currency.

Our initial denomination of SROI is dollars, but this is mostly a matter of convenience.  Money is a great simplifier.  It helps make SROI more comprehensible even while it vastly underestimates its complexity.  We will iteratively incorporate more and more of that complexity, and even if we can’t always be correct, we can be consistent.

There is currency in social capital, and working as a community, we can make it flow.

Well, both Interesting NY and SoCap08 are behind us now, and I am happy to report that both conferences were phenomenal successes - in general, and especially for socialmarkets!

The Interesting NY conference definitely lived up to its name.  The topics were all over the place, and the speakers had all kinds of backgrounds, but the end product was a full day of genuinely interesting presentations.  Since this was a general audience, our presentation was socialmarkets 101 - including a primer defining the “social capital markets”.

This was not necessary at the later conference with that exact name: “Social Capital Markets - 2008″.  Naturally, this crowd was already up the social capital learning curve, so we were able to get much deeper into the belly of the socialmarkets beast.

We had the luxury of a full hour of conference time to ourselves, and made the most of it.  The SoCap peeps were pushing hard to make this conference an interactive experience instead of just a lecture, so we left plenty of time for audience participation.

Here’s a pic of me speaking at SoCap… Allan is behind the camera:

Me addressing my fellow social capitalists

We spent about half the time explaining the whys, whats and hows of socialmarkets, and then opened up the floor for Q&A.  I was actually a little nervous about this part, since you never know if people are going to be interested enough to join the conversation (especially since we were the last talk before the lunch break…)

Turns out there was nothing to worry about.  The Q&A turned into an energetic discussion of social markets and the metrics which drive it (e.g. SROI) and for most of the time we did little more than referee!

That conversation spilled over into lunch, dinner, the rest of the conference, and in fact are still going on now - over one week and 3,000 miles later.  We learned a lot in these discussions, and perhaps even more importantly, made a lot of critical contacts with others in the social capital space.

I’ll save the details on the long-term impacts of SoCap08 for another post.  For now, I’ll just say that socialmarkets made not just new friends, but new strategic partners there.  I think these relationships will help see not just our venture succeed, but also the complementary ventures that will form the ecosystem to support the entire social capital marketplace.