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Economic Theory and Irrational Behaviour

Basic economic theory assumes that more money equals more motivation, but this has been turned on its head by experimental behavioral economics as well as new brain science. We now understand that behavior and motivation are far more complex animals and that rationality is more myth than foundational principal. Daniel Pink’s book “Drive: The Surprising Truth About What Motivates Us” provides a number of examples how motivation and performance can actually decline as monetary incentives increase.  Some of this can be explained by the structure of rewards that create perverse incentives that make CEOs and others more myopic and risk hungry. But what about motivations and performance related to social good?  For example, most people I know working in international development are aware they’ve left something material on the table in their job search – they’ve taken jobs not because they offered the greatest pay and benefits, but because they offered the chance to make the most impact on the world.  It is similar with impact investors – they mindfully make financial returns subordinate to social impact returns.  Surly, thickening the layer of monetary incentives atop these largely altruistic motivations would only strengthen them, right? Not necessarily.

Consider the example of Switzerland’s nuclear waste retold in the Brafman brothers’ book “Sway: The Irresistible Pull of Irrational Behavior“.*  In 1993 the Swiss government identified two small towns as potential nuclear waste depositories. Knowing that there is always a very strong NIMBY reaction to putting harmful waste near population centers, the researchers wondered how hard it would be to convince people to accept the proposal if they were made to understand the importance of the nation’s nuclear energy program and then essentially asked to just ‘take one for the team.’ Surprisingly, over half of the townspeople accepted the proposition following a town hall meeting that did just that. Some altruistic motivation – social obligation, national pride, sense of fairness – made these people willing to take the risk of having a waste facility in their backyard. Surprising, but not mind-blowing.

But here’s what is: in an effort to encourage the hold outs to go along with the proposal, the researchers and government went back to the townspeople and offered to pay them about $2200 per person per year. Now, the rational assumption would be that the second vote would find the same 50.8% that supported the proposal on purely altruistic motives still on board plus some additional percentage of the opponents swayed by the financial incentives. What happened instead, though, was that support fell by half!

“Instead of being motivated but the financial incentive, the townspeople were swayed to reject the nuclear dump en masse: only 24.6 percent of the people who were presented with the monetary offer agreed to have the nuclear dump close to their town (compared with the 50.8 percent who agreed when no money was offered). … Even when the researchers sweetened the deal to $4,350 – and then again to $6,525 – the locals remained firm in their opposition. Only a single respondent, in fact, changed his mind and accepted the offer when more money was put on the table.”

How could that happen?

Brain Science and Value Proposition

It turns out that the brain centers responsible for making or losing money and giving it away are not only separate, but mutually exclusive! When you make or lose money for yourself, the nucleus accumbens is at work – the same brain center associated with the excitement of flirting, watching your team win, gambling, and most pleasure drugs. It’s the dopamine-releasing part of the brain that scientists call “the pleasure center”, and it’s responsible for addictive behavior that requires ever more stimulation for the same high.

Altruistic behavior, on the other hand, excites a part of the brain called the posterior superior temporal sulcus. This is the brain center responsible for social interactions and bonding. MRI imaging shows that even just watching someone else play a game that pays a financial reward to a charity will light this center up.

So, one might think that humanitarian workers and impact investors have the best of both worlds. They get their pleasure center excited because they are, in the end, getting paid something. At the same time, their do-good motivation and sacrifice of personal financial reward for the better good gets their ‘altruistic center’ excited. But this isn’t how it works. The brain centers are mutually exclusive – that is, they can’t both be in operation at the same time. Either you are motivated by financial return or by altruism, but not both! When the Swiss government offered money to the townspeople, the part of the brain that considered the offer switched from the ‘altruism center’ to the ‘pleasure center’ and it turns out that it costs a lot more to make a convincing case the later.

This could have some significant implications for how we think about the value proposition on offer to impact investors. Typically, the sector believes the value proposition is both doing good and making money. Not only is this often a problematic proposition from a practical point of view, but it may be one that fundamentally misunderstands how motivation works from the point of view of brain science.

Whether you’re a bridging organization (like an impact investment fund manager or a social impact bond originator) or a social impact program implementor, you have to be clear about the value proposition you offer investors. What are you really offering and how do you properly market it? As Mulago Foundation‘s Kevin Starr argued in a must read three-part series for SSIR called The Trouble With Impact Investing, “There’s only one bottom line. It ought to be impact.” He makes good arguments: (1) most high-impact solutions in development don’t earn revenue, let alone pay you your money back plus interest, (2) overcoming market failure to reach the poor requires a subsidized effort, (3) just because something earns revenue doesn’t mean it should be forced to make a profit, and (4) focusing on profit can drive an organization off mission. (Excuse the plug, but I’ve previously decried how the last two have played out in the micro-financial sector in Profits & Perverse Incentives: The New Face of Microfinance.)

I’d like to add a fifth argument: if you chase too hard and offer ROI designed to appeal more strongly to the profit motivation, you may unintentionally crowd out the altruistic motivation, making it more expensive than necessary to capture the same impact investment dollars. As the cost of attracting impact investment funds increases, so too do the problems inherent in squeezing profit out of social impact programs.

In the second part of the SSIR series (actually written by Starr’s colleague Laura Hattendorf) an argument is made for clarity of primary investor purpose – profit or impact. But they only go so far as to say that the mix can be fuzzy, not impossible. “They are not mutually exclusive, but how [impact investors] make decisions, deploy capital, and support organizations is likely to be much different depending on which approach is primary.” But what if they actually are mutually exclusive as the brain science suggests? What if the assumption that people are actually capable of processing and balancing their blended motivations in a double or triple bottom line in their investment strategies is wrong?

Solutions: Decisions in Stages, Markets in Strata, Revenue in Tranches

One potential solution is to utilize decision processes that overcome the brain’s limitation. While their brains may not be able to process both motivations at once, there is no reason to doubt the reality of impact investors’ blended motivations. If they were truly limited to maximizing only one or the other, then impact investors simply wouldn’t exist. If they say they want both profit and impact, so be it. I would guess that the limitation is only deal and moment specific, that is, as we think about a particular opportunity at a particular time, only one of the two brain centers is active. But, what if impact investors used processes and tools that get around this limitation? For example, a multiple stage vetting process that first scores options on their profit merits (such as setting a specific minimum ROI) and then considers those that pass the first filter on their social impact merits (or visa-versa). Or, creating a balanced score card that spits out a standardized grade based on all the factors that you decided ahead of time are relevant. Given the complexity of many impact investment products, it is unlikely anyway that investors don’t already consider them from various angles over time, swapping between brain centers as they do.

Another potential solution is for fund seekers to purposefully stay out of the middle by assuming that, at any given moment, an impact investor is either thinking out of profit motivatation or impact motivation, but not both. Regardless of the legitimacy of blended motivations, create products designed to primarily target just one at a time and make sure you have both kinds in your portfolio. You won’t be able to sell a high impact opportunity to someone seeking profit if it doesn’t have the right mix of financial risk and payout, and you cannot sell an opportunity with high financial return to someone seeking impact if it doesn’t have the right assurance of impact.** In fact, as already mentioned, if you sell the financial return too hard to someone who’s largely in it for the impact, you run the risk of tripping his thought process from the ‘altruistic brain center’ to the ‘pleasure center’. And that could cost you.

While impact investors themselves may yet be confused about which primary hat they wear at any given time, their brains aren’t. Deals need to be structured that allow impact investors’ true colors to show at the moment of decision. One way to do this is suggested by Michael Belinsky from Instiglio in another SSIR article, Social Impact Bonds: Lessons from the Field. He notes pay-for-success contracts may ultimately encompass several ways of engaging the different types (read motivations) of impact investors out there. Social Finance (USA) may soon try out a scheme in a Massachusetts social impact bond project that slices the expected revenue stream into tranches, offering the lower-risk tranches to foundations, and pitching the premium tranche to “investors with the highest appetite for return.” Belinsky also notes that the New South Wales government in Australia is “exploring attracting for-profit investors by offering to share some of the bond’s downside risk-essentially buying the lowest tranche of its own bond.”

Impact investing is a young and rapidly evolving market with many unknowns and uncertainties, especially the nascent social impact bonds market and the not yet existent development impact bonds market. Whatever the solutions are that end up getting tried, proved and adopted, it’s important for everyone to be as clear as possible about what’s in this new market. We know what pure investors demand (profit), and we know what most foundations and grant-makers demand (impact), but what do impact investors want? They say they want both, but their brain structure forces them to consider what’s on offer in one of  two very different and mutually exclusive brain centers. One would hope that impact trumps profit and that the primary consideration takes place in the brain’s ‘altruism center’, but with profit in the mix, this is not guaranteed. So, the question is how to match the supply of investment opportunities to match the real demand. This most certainly will be a discovery process as different combinations of risk, profit, and impact are experimented with, as different structures, including segmented tranches of revenue streams, are developed, and as different decision processes are tried and evolved.

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* The study behind the story is titled “The Cost of Price Incentives: An Empirical Analysis of Motivation Crowding-Out,” was conducted by Bruno S. Frey and Felix Oberholzer-Gee, and published in the American Economic Review (1997)

** Measuring impact will continue to be increasingly important as impact investors who consider opportunities in the ‘altruistic brain center’ continue demanding more rigorous accountability to social ROI such as that which is easily available to those whose primary consideration is financial ROI.

Foul Play?

The SOCCKET is a soccer ball with an internal mechanism that turns movement into stored energy that can be accessed through a built in jack. It’s marketed as a “FUNctional solution to real-world problems” – specifically the lack of access to reliable electricity and the negative side effects of using kerosene lanterns, diesel generators, and wood-burning stoves. It’s garnered a lot of praise and accolades.

Last week I wrote a critical post that kicked at the SOCCKET and its maker Uncharted Play from a number of angles. Among other critiques, I thought that marketing the equivalent of four weakly-rechargeable AA batteries inside a relatively expensive soccer ball as a solution to anything grossly overplays the potential of the ball and misleads investors and buyers about the social impact they get for their money.

Below, Julia C. Silverman, the Co-founder & Chief Social Officer of Uncharted Play responds to my post ‘Deflating the SOCCKET ball‘. I’ve already said most of what I wanted to say, but I’d like to hear from you. Is the case for the SOCCKET overinflated? Does Julie adequately defend the SOCCKET’s place in the social enterprise playing field? Is this thing a game changer for the poor or just another example of bad aid? Would you invest in the SOCCKET or wish it deflated for good?

Hi Aaron,

As a heads up, some of the copy below is from the email responses I sent earlier this week to Bill Easterly and Seth Gitter.  Just want to be transparent here.

At any rate, as co-founder of Uncharted Play and a co-inventor of the SOCCKET, I want to thank you for your interest in, and perhaps more importantly, your critique of our movement. Constructive comments like yours help us to confirm that we are on the right track to creating the maximum positive social impact in communities around the world (and I mean that without irony).  As an aside, with regard to the title of your post, I’d like to note that the SOCCKET ball itself cannot be deflated!

I wanted to respond personally to your submission since I, too, come from a background in the social sciences. In fact, prior to launching Uncharted Play, I worked on a team of development economists at the World Bank in the Africa Sustainable Development division following several years of fieldwork on the ground in sub-Saharan Africa. Hence, I am no stranger to the development aid dialogue, both on the international and grassroots levels.

At any rate, the overarching point I’d like to highlight is that Uncharted Play is focused on facilitating FUN and letting kids be kids. This stance – and the very simplicity of what we do – resonates with our partners and fans. Providing SOCCKETs is not just about creating change that numbers can track; it’s about letting magic exist in the life of a child.

If it were just about producing as much energy as cost- and time-efficiently as possible (which it seems is the unswerving position of engineers and economists alike), Uncharted Play would be distributing a hand-crank. The big difference is that, unlike a hand-crank, a soccer ball is fun. We are working to distribute a product that emphasizes the joy in life, not something that simply reminds users of what they lack. As you acknowledge in your post, there is nothing particularly joyful about bed nets, deworming pills, bore holes, or even shoes, but the whole point of SOCCKET – it’s very essence – is that it’s supposed to be fun and exciting.

Further, I’d like to clarify Uncharted Play’s business model for the SOCCKET product because this seems to be a particularly sensitive point.  We are a social enterprise, not an NGO; we answer to our investors and are kept afloat by revenue, not donations as your post implies (in fact, we only added a contribution page on our site due to overwhelming demand from people wanting to contribute to our movement). Given the distribution of accountability, it would be all too easy for us to simply pay lip service to our social mission while dedicating the bulk of our financial and human resources to sales, marketing, etc.. However, as I mentioned above, this is not the case: we are truly focused on collaborating with communities to implement meaningful, catalytic programs, and – rather than resting on our laurels or focusing strictly on profit – we are taking aggressive action to engage closely with our partners and participants and track outcomes so that we can drive toward maximal positive impact.

Uncharted Play’s chief aim for the SOCCKET movement is to sustainably distribute as many of the balls as possible to resource poor communities around the world. In order to deliver the SOCCKETs, build context-relevant curricular programming around the ball, and collect data to monitor and evaluate our impact, we partner with best practice NGOs on the ground in our target areas, such as Instituto Promundo in Brazil, Children International in Mexico, Homeless World Cup in Haiti, and Universidad Pedagogica in El Salvador.

We have devised a unique business model so that we can simultaneously maintain financial sustainability and pursue our social goals.  We take a two-pronged approach, which allows us to reach users in developing and, eventually, developed settings.

For our users in disadvantaged communities, corporations and public institutions underwrite the cost of SOCCKET distribution through bulk/wholesale ball purchases. Users (children) “earn” the balls by participating in the programming of our official NGO partners. For those in wealthier areas, SOCCKETs will soon be available for commercial retail on our website (in late 2012/early 2013), and we will aim to expand to an in-store presence during 2013. Revenues from the direct-to-consumer sales stream will go toward our SOCCKET social impact activities. Like you, many people are eager to get a ball of their own!

As you can imagine, we’ve dealt with the opportunity cost question before (and, given my own background, it’s a point I know not to take lightly). That said, I can confirm that, rather than taking funding away from other causes, the SOCCKET is actually attracting investment that would not otherwise come to the sustainable development space. Our corporate partners are wonderful, but they are not development institutions. When they were deciding to work with us, they were evaluating whether to put marketing dollars into SOCCKET sponsorship or into another campaign, not another charity.

We are a new company (just over 1 year old), and we certainly do not have unlimited resources. This has implications for where and how we have implemented our programming thus far. In the near future, we hope to “target failure” by going to countries with limited infrastructure; however, those initiatives will be more expensive to execute and will require more careful planning (e.g., getting in and out of the DRC is no easy task). Moreover, our initial programs in the countries that do not have the so-called “most glaring cases of need” will provide useful guidance in shaping improved technical, logistical, and social impact plans.

Uncharted Play remains extremely sensitive to the potential unintended consequences of our initiatives. We are well aware of the unfortunate fate that befell the PlayPump, and we took measures to make sure play with the SOCCKET will never become a chore for our users.  For example, we capped the SOCCKET’s power storage capacity so that children would not be forced into “play slavery.” Further, we designed the SOCCKET product in collaboration with our end users rather than in a vacuum. Indeed, children’s feedback from pilot studies in Mexico, South Africa, El Salvador, Nigeria, and Brazil has been critical as we continue to iterate our technical designs for the SOCCKET.

From the kids’ engagement with our prototypes, I can tell you that, even without the ball’s energy-generating functionality, the SOCCKET is indeed a “boon” for our users. In the communities where we work (and hope to work), children are used to fashioning make-shift balls from whatever is available, such as a bundle of plastic bags, an empty bottle, or a piece of garbage – I’ve even seen a brick. Since the SOCCKET is an honest-to-goodness sphere that does not need inflation, cannot be deflated, and lasts multiple years instead of mere weeks, the ball has been very well-received indeed by users.

In terms of the added impact of SOCCKET’s energy component, kids have found the product to be truly magical. The response has been universally positive, and variations on the same scene unfold each time we first introduce the ball. First, it’s pure joy – and that is before the kids even know there is anything different about the ball.  When we actually say that the ball is special, that it can harness energy and power a lamp or a phone, there is always a collective yell of excitement.  Then, when we plug in a lamp to demonstrate, the kids’ eyes just pop out of their heads, and you can see the wheels beginning to turn.  There’s a moment of silent amazement, and then, right away, kids start brainstorming their own ideas.  “We should make one that has a soda fountain in it!” or “We can make it different colors so it looks like a rainbow when you kick it!”.  Just seeing a cool idea like the SOCCKET immediately inspires kids to unleash their own imaginations.  I certainly think that type of creative inspiration qualifies as a “boon” for our users even if there is no MDG that adequately captures it or tried-and-true metric for recording it.

Thanks again for getting in touch. I hope my responses have helped to illustrate the delicate balance Uncharted Play has worked to achieve as a social enterprise that is both financially sustainable and socially responsible. I say this not as an excuse for any failings you might perceive, but as a call to action for other organizations to follow our example and place social impact as a central objective in their mission and, more critically, their operations.

Keep in touch. I’ll make sure my team lets you know when the ball is available

Cheers – Julia

The SOCCET: a premium soccer ball and an eco-friendly generator.

Since learning of the SOCCKET a couple weeks ago, I’ve been perplexed by the lack of critical chatter in the development blogosphere. We shredded 1 millions shirts, bruised World Vision over its Superbowl t-shirt debacle, and happily beat the hell out of PlayPump. So why the awkward silence over the SOCCKET, which to me looks to become PlayPump 2.0? Even Bill Easterly was surprisingly light-handed on his blog after his initial tweet saying that “Lant Pritchett gave this [SOCCKET] as a hilarious example of what’s wrong with development today”. I thought this was a prelude of much snarky scrutiny to follow. Instead he writes, “Now I’m not going to do what you expect and get all crotchety at this point and say this is all useless nonsense.” I say, “Why not?”

As far as I can tell, the SOCCKET is just another example of donor-driven development deserving of some seriously snarky jibes.  Maybe everyone’s just getting tired of pointing out the same basic fallacies again and again to well-intentioned social entrepreneurs and the donors they market to. And, as TOMS shoes has proven, people’s aspiration to do something both easy and good for the world (and, in the case of TOMS, the appeal of  winning social kudos for displaying these philanthropic impulses) trumps our efforts to say, “hold on a minute, there’s a problem here; this is not good aid!“

The SOCCKET sounds pretty cool. I’d like to have one quite frankly. It’s a soccer ball with a gyroscopic mechanism inside that captures the energy of motion and converts it into clean electricity. It’s a soccer ball and it’s a mobile six-watt power generator. Cool. I’d take mine to the beach. According to the story on their website, Unchartered Play, the maker of the SOCCKET, was founded to “show the world that doing good and doing good business need not be mutually exclusive.” The thing is, I wonder both about the good they claim to be doing and about how their business model demonstrates ‘good business’ rather than say, so-so charity.

Cost-Benefit Failure. Uncharted Play says that 1.6 million people are killed by alternatives to the SOCCKET. Specifically, they are referring to the effects of harmful emissions from kerosene lamps, diesel generators, and wood burning stoves. I’ll accept that. But what I won’t swallow is that the SOCCKET is a sound alternative to these. There are already many far cheaper and more efficient solar/LED alternatives to kerosene lamps available for lighting (like this or this or this). There are also many other clean-burning alternative cookstoves out there. Although the SOCCKET is cheaper than some of these, I can’t imagine how it could possibly compete as a family’s primary source of cooking heat. Plugging a hot plate into a soccer ball with the power output equivalent of four AA batteries is just not culturally or practically commensurate with cooking on a fuel-burning stove.  As far as diesel generators go, this is really a stretch. Communities use diesel generators to produce large amounts of electricity – as in several thousand watts of electricity. You would need 1000 SOCCKETs to equal the power output of a single 6000 watt diesel generator.* That would cost donors $60,000 (at $60 per SOCCKET) vs. $2-5,000 for a decent diesel generator. I don’t know how to calculate the comparison between diesel fuel for the generator and food fuel for the caloric input required to power 500 hours of kids kicking these SOCCKETs around for a charge, but I’m guessing the diesel’s cheaper.** Maybe I’m thinking too much like an economist here, but this doesn’t seem like a sound option for replacing community diesel generators. I hope this isn’t an example of the ‘doing good business’ thinking at the foundation of Uncharted Play.

Targeting Failure. Uncharted Play says that 1/4 of people in the world live without access to reliable electricity. Again, I’ll accept that. And then I’ll wring my hands and ask “What can I do about it?” I can give a soccer ball/electrical generator to children living in one of 19 countries through their ‘unique distribution process’. Now, certainly these countries were selected because they represent some of the most glaring cases of need, right? Wrong. Eleven of the 19 countries have rates of access to electricity higher than their own statement of global need. Let me say that again – most of their targeted countries have above average access to electricity. For example, you can give a SOCCKET to a kid in Brazil, where 97.8% of the population has access to electricity. Or China (99.4%), Mexico (98.5%), Cuba (97%), Dominican Republic (95.9%)…shall I continue? As I read their list of places where you can donate a ball, few rank in the bottom half of their respective regions for access to electricity.*** I mean, if you were going to target an electricity access intervention based on need, there’s just no way that Brazil, Mexico, and China make the cut.

Now, certainly there are pockets of people in these countries that don’t have access to electricity, and we might assume that their distribution partners are targeting intra-nationally to reach these people. But many of their targeted countries have largely shown a capacity to supply their populations’ demands for electricity through governmental and/or private service providers. The basic problem here is that distribution is based on the supply of distribution partners rather than a mindful targeting based on unmet demand. Shoot, there I go again sounding like an economist, what with all this talk of supply and demand.

Image from Gwenn Mangine. Used without permission. Is that cool Gwenn?

Market Force Failure. Speaking of supply and demand, the most egregious thing about this ‘good business’ model is that the buyer, the distributer, and the user are all three different. In other words, the families that get these things don’t have to be convinced they are worth the $60 Unchartered Play is charging for them. They get them for free. Of course kids eyes are lighting up with free soccer balls that are all gadgety with a plugin light. Ask their parents to cough up even $30 for one, though, and I bet you’d have a pretty hard time moving these things in rural villages across Malawi or El Salvador or Laos. I’m not sure the SOCCKET would survive long if its makers were accountable to the end users for the value of the good – unless maybe they sold them online at The Sharper Image.**** Take TOMS shoes for example – priced at over $50 a pair in the US, they only fetch $1.25 in the Haitian marketplace. Ouch.

Luckily for Unchartered Play, the business model divorces their revenue from consumers’ cost-benefit calculations. They don’t have to convince the end user that the SOCCKET is a good deal, they only have to convince a donor that they’re a good deal. How do you do that? Insinuate that you can provide poor villagers with reliable electricity, save 1.6 million lives, and save up to 30% of families’ incomes. Paint a mental image of needy children discovering joy, line up smiling celebrity endorsements, and use words like ‘innovation’ and ‘eco-friendly’.  Tell them, “give a SOCCKET – for $60 you can make a world of difference.”

Correct me if I’m wrong, but this is the ‘business model’ of a charity, not a social enterprise.

Oh, Joy! PlayPump 2.0. Play is great – awesome even. I totally support the right of children the world over to play. I think keeping ‘joy at the forefront of our lives’ is a great aspect of Uncharted Play’s mission. But will it still feel like play when daily access to a basic need like light or cooking heat is tied to it?  In the marketing pitch, the SOCCKET runs on child play. But I suspect that with extended use in the real world, kids and parents will tire of having to invest 30 minutes into kicking the ball around to get back 3 hours of relatively limited light. Might the reliance on child play end up being a source of child labour?

The infamous PlayPump at its best (not its usual).

The PlayPump is an instructive forebear to the SOCCKET. Its maker, Roundabout Water Solutions, also talked about joy, claiming to “bring joy and access to clean drinking water” by utilizing the rotational movement of children at play to pump water. According to them, “Playing on a roundabout or merry-go-round has always been fun for children, so there is never a shortage of ‘volunteers.’” But, this claim was not borne out in the field. Owen Scott, an aid worker with Engineers Without Borders Canada in Malawi documented his observations in a remarkable series of six blogs, noting “Each time I’ve visited a PlayPump, I’ve always found the same scene: a group of women and children struggling to spin it by hand so they can draw water.” WaterAid refused to adopt the PlayPumps technology, in part, because it’s “reliance on child labour.” Owen’s fourth post in the series includes a video of local teachers pleading with aid organizations to stop building the PlayPumps.

Like the SOCCKET, the PlayPumps were a relatively expensive and relatively inefficient solution to a basic needs access problem that required an inordinate amount of kinetic energy input for the output given back. Like SOCCKET, they were marketed to donors who paid to have them built by the hundreds (thousands?). Eventually, the realities of the lame cost-benefit equation could no longer be ignored and their construction has all but ceased, replaced by the reliable if unremarkable, proven if uninnovative, old school hand pump.

To use Laura Freschi’s language when talking about the PlayPump, I suspect the SOCCKET will for a time “represent the triumph of bad but photogenic solutions in a broken aid marketplace” and be shown to be another “donor-pleasing, top-down solution that simply [doesn't] fit many of the target communities.” To use Owen Scott’s language when talking about the PlayPump, I think the SOCCKET illustrates well the “triumph of rich-country whimsy over poor-country relevance. It illustrates how standards, like basic cost-benefit analysis, that are routinely applied to public expenditure in developed countries, aren’t applied to our foreign aid spending.” It is the quintessential donor-driven development intervention. It is a solution dreamt up by innovators in the rich world, marketed and sold to donors in the rich world, and dumped into needy communities. Because it’s free, there’s no incentive for communities to even bring up the opportunity costs involved. I guess that’s where we, the snarky development bloggers come in.

Why it Matters. Look, I actually like these guys over at Unchartered Play. I like their mission; I like what they’re trying to do. I think they’ll sell lots and lots of SOCCKETS. They seem like a smart, innovative, and distractingly attractive team of people. The co-founders are even fellow Harvardians. I’d like to be friends with these folks. Unfortunately, I’m pretty sure this blog post blunts that possibility. So why am I socking it so hard to their beloved SOCCKET? (bah-dump-bump.)

The SOCCKET is a pretty cool innovation that deserves a shot to live or die in the marketplace. What bothers me, though, is that its impact in the developing world as a solution to scarce electricity access is just way oversold. It’s not just that I figure the cost-benefit ratio of their product fails to be competitive against other alternatives to kerosine lamps and wood burning stoves, or against diesel generators. It’s not just that they are grossly mistargeting countries on energy access grounds. It’s not just that their business model side-steps direct market forces that might otherwise determine that their product’s cost exceeds its actual value – making them functionally a charity, not a sustainable social enterprise. It’s not even that the SOCCKET has yet to prove its relevancy in the field under extended use. It’s all of this coupled with the fact that their super slick marketing all but guarantees that thousands of these things will get fabricated and shipped all over the world, crowding out donor dollars that could be going into field-tested, rigorously-proven development interventions that have actually been shown to ‘make a world of difference’.

I know that when innovation is involved, competition for aid dollars isn’t a perfect zero-sum game, but donor dollars make, to a substantial degree, a finite pie. They aren’t as sexy or innovative or gadgety, but bed nets, deworming pills, bore holes, some improved cooking stoves, or chlorine dispensers at water sources beat the pants off of the SOCCKET as ‘tools to address major issues facing society today.’ And, when donors get caught up in the excitement of well-marketed, but ultimately ill-conceived interventions, less money is available for that which is proven. Granted, these proven interventions don’t help much with the last part of Uncharted Play’s mission statement to keep ‘joy at the forefront of our lives’. … Unless you think supporting proven cost-effective interventions that help people live longer, healthier, more educated lives is something worth getting all joyful about.

Update – July 2, 2012: You can read Uncharted Play’s Co-founder and Chief Social Officer Julia C. Silverman’s response to this post at The SOCCKET ball bounces back?

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* The SOCCKET supplies a 6-watt power output.

** Based on their claim that 30 minutes of play equals 3 hours of light from the SOCCKET.

*** Certainly Malawi (9%), Uganda (9%), Kenya (15%), Haiti (38.5%), and Laos (55%) qualify, but that’s about it. But, even these are considerably better off than other countries in their respective regions. What about Burundi (2.8%), Chad (3.5%) or Rwanda (4.8%) in Africa, Bangladesh (41%) or Cambodia (24%) in Asia, Honduras (70.3%) or Nicaragua (72.1%) in Latin America?

**** Same goes for the distributers. It’s like the losing team Superbowl t-shirts distributed by World Vision. This would never happen if World Vision had to actually pay the tax-deductible value claimed for each shirt ($11.65) instead of counting this value as donation income and just paying the shipping costs. The distribution partners don’t have to be convinced that the value of the Soccket is $60 a pop, they get to count that as donation income. GIK is great for making organization look efficient. Its an almost unethical incentive to distribute. The final cost to provide a SOCCKET to a poor family can be approximated by the per unit sum of the funding partners’ and distributions partners’ contributions.