I recently finished reading Brian Trelstad's article, "Simple Measures for Social Enterprise" in the MIT Innovations Journal, where he discusses how the Acumen Fund evaluates its investments. I had several thoughts when reading the article, most of which I hope to have the time to write up on the blog.
Are there cases when you do not need to evaluate the impact of your efforts?
I can imagine several cases. Say, that you are deciding between ten potential investments. One has a positive net outcome on your target population, the others have no impact on net. You have $1000 and can invest only $100 or nothing into each investment. Ex ante evaluation of your efforts is ridiculously expensive, at $900, but reveals perfectly information about each investment's outcome. Would you pay $900 to have that information revealed? If you do, then you will end up paying $900 for due diligence and $100 into the actual investment, for a total of $1000. However, you can also choose to pay $100 for each of the 10 interventions, for a total of $1000.
This example is silly because it assumes a very expensive due diligence process, investments that have either no impact or one positive impact, and the ability of due diligence to reveal perfect investment outcomes.
However, the example does point out the tension between investing and analyzing the impact of your investment. It also suggests that, sometimes, impact analysis is not necessary to reach the ultimate goal of revealing the impactful investment.
This example is silly because it assumes a very expensive due diligence process, investments that have either no impact or one positive impact, and the ability of due diligence to reveal perfect investment outcomes.
However, the example does point out the tension between investing and analyzing the impact of your investment. It also suggests that, sometimes, impact analysis is not necessary to reach the ultimate goal of revealing the impactful investment.
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