How Nonprofits Waste Millions

One Laptop Per Child was an ambitious nonprofit to do exactly what it sounds like. Give laptops to kids. The American Economic Journal two weeks ago published a paper which said this about OLPC:

“No evidence is found of effects on test scores in math and language. There is some evidence, though inconclusive, about positive effects on general cognitive skills.”

This most recent study is the most comprehensive on the program collecting data over 15 months from 318 schools in Peru where over $150 million was spent on this program. In line with survey and anecdotal evidence from 2012, One Laptop Per Child is definitively a colossal waste of money. The question I want to dive into is: How does this happen?

OLPC is not the only organization ineffectively to use massive sums of money. In development it is a common occurrence and has lead to incredible amounts of cynicism amongst donors and those who wish to help those with the least.

When looked under the microscope, OLPC was destined to fail. It’s noble intentions we built on lofty ambitions but more importantly absurd assumptions that were left unchecked. In all my work abroad and in studying development, the problems always lie in the assumptions we have and don’t think to question.

Nicolas Negroponte is the founder of One Laptop Per Child and is a professor at MIT. He has had a distinguished career which includes founding the MIT Media Lab back in 1985. That distinguished career though has had very little to do with education in the developing world.

In his own words Negoponte says that “OLPC was founded on the theories of constructionism” which is essentially learning by doing. That in and of itself sounds great. There isn’t a whole lot to object to or raise an eyebrow. The problem though is in how he wants to implement that theory. That is where the laptops come in.

Negroponte’s career is at the intersection of architecture and computers. He became a believer in constructionism in the 1960s as experiments were conducted of children who were exposed to computer programming. In talking about the origins of OLPC Negroponte states:

If a child writes a computer program, that child is engaged in the closest approximation we can come to thinking about thinking.

This is all fine except not every kid wants to code. Not every kid should code. OLPC disagreed.

The evidence they saw pointed them to use a kernel of truth and project on the entire population. That key assumption was wrong. Their “truth” stopped being true once they assumed they could generalize what was true only in isolation.

But the implementation of the program was far worse. (I highly recommend watching the video I put together below) Negroponte and OLPC wanted to bypass teachers and schools altogether. They intentionally dropped off laptops and high tailed it back to the comfort of air conditioning and Starbucks. Negroponte on camera! says “teachers need to have the self confidence so that the students can teach them”!!! (9:45 in the clip) Yep teachers are irrelevant folks. Take it from a MIT teacher… err professor.

Negroponte even goes on to say that up to 50% of the kids are teaching their parents to read and write. “It’s really quite amazing” he says. Only if it were true that is.

The truth is that there is no evidence test scores were any higher and the unavoidable failure of the program is that computer use plummets. A few months into the program 70% of the children use the laptops once or less a week.

Let’s go back to the beginning, if it sounds odd to you that giving a $188 laptop (was supposed to cost $100) to poor kids around the world is the solution to poverty you aren’t in the minority. No one actually in development could have come up with an idea like OLPC and that’s the point. The people on the ground aren’t the people with money and connections. The elite, people like Negroponte are.

Nonprofits don’t have customers, they have donors. Customers have to use the products and services they purchase. Donors are simply looking to feel good. If someone can come along and convince them of a solution that sounds nice, money changes hands. Donors aren’t on the ground in developing countries. If they are it is for a short trip where the red carpet is rolled out and then things revert to normal once donors leave.

This information asymmetry allows for terrible solutions to receive money because donors don’t have a clue. Sadly, often nonprofits aren’t much better. Why do you think one of the best nonprofits in expanding water rights is co-founded by Matt Damon? Water.Org. A competitor is started by a former club promoter, Charity: Water. These aren’t bad organizations and I can guarantee they are doing a better job than OLPC ever did but these people are story tellers. They are not practitioners.

Would you expect Facebook or Google to be founded by non-tech people? Of course not. They actually have to make a product we use. Their story telling ability doesn’t matter if the product is terrible. Nonprofits are different because we can’t tell when the product it terrible.

I don’t know what the solution to that is. But I can tell you it is this problem that allows hundreds of millions of dollars to be shuffled into ineffective programs each and every year. All in the name of “doing good”.

James Crawford is the founder of Venture Leather Company in Kenya where 100% of the profit is invested back into businesses in Kenya. Check out the video blog on YouTube to see what it is like starting a business in Africa.