Wednesday, November 01, 2006

Philanthropy's New Prototype

Continued from page 4

By James Surowiecki

One Laptop per Child is part of this broader movement: though it is receiving grants rather than making them--Google and News Corp. are among its donors--it is an excellent example of the application of business logic to social problems. From one angle, in fact, OLPC looks more like a company than like a traditional charity, in the sense that it is designing and marketing a product and outsourcing its production to firms that are expecting to make a profit. Instead of circumventing the market, then, OLPC is working within it, and Negroponte is counting on the efficiencies generated by market processes to drive the price of the laptop down over time. At the same time, because OLPC is relying on governments to buy its product, it needs to spend a great deal of time lobbying and cajoling government officials, a task that is very familiar to activist organizations.

OLPC is unusual in relying on three different kinds of enterprises--private, nonprofit, and governmental--to carry out its mission. On the one hand, this structure arguably makes the project more robust, since OLPC can draw on the different strengths of each. On the other hand, it also makes things more complicated. Negroponte, for instance, says all his advisors believed that OLPC would need to be a for-profit company in order to attract the necessary talent. ("They were wrong," he says.) More important, because OLPC is not simply a charity, it has a much harder time making things happen than it would if it were giving money away. Dealing with governments is not easy, particularly since OLPC has initially chosen to try to do business primarily with big governments: Argentina, Brazil, Nigeria, Thailand, and China. (Perhaps it's not a coincidence that it was a small country, Libya, that was the first to make a commitment to the project.) "Governments are hard; large governments are harder; ministries of education are harder," Negroponte says. "So we have indeed tackled the hardest of the hardest of the hard." The course of OLPC's efforts in this sphere has not run entirely smooth. In June, Sudeep Banerjee, India's education secretary, wrote a letter to fellow members of his government saying that the country was not interested in buying laptops for its students and that "we cannot visualize a situation for decades" that would justify the program. China, however, remains a possibility. Negroponte has met with the Chinese minister of education twice.

For all the challenges that OLPC's odd structure presents, though, it's hard to see how such a novel project could succeed, at the scale Negroponte has in mind, as either a charity or a for-profit company. "We'd like to move five to seven million units in our first year," says Ethan Beard, a Google employee who sits on the board of OLPC. "That's already a pretty sizable amount of money. But eventually, we'd like to move 20 million units a year, which is $2 billion or more, and there are very few, if any, nonprofit institutions that could handle a project of that size." And had OLPC been a for-profit company, persuading governments to buy the $100 laptop would have been far more difficult. "If you're going to be going in to government ministers and pitching them on education, especially with a project this new and ambitious," Beard says, "you need to be able to say, 'We're not doing this to make money,' because otherwise your motives are always going to be in question." Interestingly, there may be at least one important exception to this rule. "China does not understand nonprofit structures," Negroponte says, "and many people just cannot believe we are doing this philanthropically."