The Why Axis: Innovation is Key

Chapter 10 of the Why Axis discusses the reason behind many people’s willingness to give to nonprofits and how this changes the way these nonprofits run their companies. The chapter starts off by telling of a child who was the star of a 2008 Academy Award winning documentary entitled “Smile Pinki.” This child from India, Pinki Sonkar was born with a cleft lip and faced many hardships early in her life because the way people treated her. But one day she was introduced to a doctor employed by a nonprofit who agreed to preform surgery to rid of this problem. Gneezy and List brings up this story as way to make the point that a good business model for a nonprofit can have great outcomes, like that of Pinki’s story.

Gneezy and List point out early in the chapter that the procedure for removing a cleft lip is a fairly easy one. The question that this chapter explores is, why aren’t more of these children able to receive help? In the previous chapters Gneezy and List discuss how people are motivated by self interest even though people spend money and resources on helping others. It is this way of thinking that leads to different types of nonprofit platforms being developed. The authors use Brian Mullaney as an example of a business oriented individual who had the passion for helping others. The chapter argues that charities need to have business knowledge and knowledge of the markets to make a successful nonprofit company.

The unique aspect about Brian’s nonprofit is that they conduct field experiments to find out the best way to maximize their resources and time. These experiments were designed to figure out the best way to incentivize donors to continue to contribute to the cause. This piece of Brian’s nonprofit business platform is what makes him such a good example. There are economic theory and thought that is accepted as simply correct. But there are always multiple factors and variables that go into every market interaction that can change the way Economics works.

In Brian’s situation, he was trying to find way for his nonprofit to outperform other marketing/advertisement techniques. Many nonprofit companies send a letter asking for donations and other contact information, but Brian tried something a little different. He sent letters asking for donations just like other companies, but also provided a place on the letter to mark if the donor would not like to contacted again. Gneezy and List point out that most nonprofit advertising personnel would say that this is madness. But in the end, the experiment was a huge success and attracted more donors than letters that didn’t have this option on it. This type of experimental work is important to any business owner or economist, because it allows us find the value of innovative methods. Many times it is easy to follow popular belief, but taking an innovative path can have its payoff.

Leave a Reply

Your email address will not be published. Required fields are marked *