This one weird trick prevents cancer research from going up in smoke.
Nonprofits serve the public interest. When they go under, their assets can be lost. Trusts can preserve public goods and protect them from the abyss of bankruptcy.
Last month, a trove of publicly-funded cancer research at The Center of Cancer Systems Biology was lost after the Center’s nonprofit fiduciary, Genesys Research Institute (GRI), collapsed into bankruptcy. Like many stories that go this way, the end came suddenly, then slowly: GRI closed the Center in September 2014, filed for bankruptcy protection nine months later, and then spent “months” trying to find a new home for the research material, including “thousands of little glass tubes of cells and proteins, pieces of human tumor tissue, and other biological samples”, representing a decade’s worth of work. After failing to receive a meaningful bid, the research material was destroyed, and the equipment sold at auction.
This story isn’t uncommon. Nonprofits are stewards for public goods that benefit everyone — like cancer research. These public goods live in nonprofits because it may be difficult to build a market for these goods in the short-term. Being a nonprofit, however, doesn’t actually exempt an organization from the hard problem of actually being profitable, so that staff can be paid and the lights kept on. Sometimes, even if a nonprofit is doing excellent work, they may not succeed at building a business model for it. Here, the particulars just happened to be particularly unfortunate, including a failed eleventh-hour attempt from the research team and funders to argue that they, not GRI, ultimately “owned” the research.
But whether the researchers won or lost here hides a more important point: every day, public goods are gambled on the continued financial health of their nonprofit stewards. If (or more likely, when) a nonprofit fails, any assets it controls are up for grabs, whether to a like-minded organization (ideally), a rent-seeking rival (shoutout to Mylan), or the incinerator. GRI may have failed due to mismanagement, but the Center failed create a backup plan for GRI’s failure. The price of this failure: $30m of public money, and ten years of research.
At the end of the day, it doesn’t matter why an organization closes its doors, just that it does. Sometimes (and maybe even more than that) well-intentioned organizations shutter — people leave, funding runs out — but that doesn’t mean the gains they made should be lost. When they are lost, it’s not merely a failure of management: it’s a failure of philanthropy. Funders invest in ideas that can change the world for the better. To make those ideas happen, they invest in imperfect vehicles: nonprofits. Despite this, most funders simply don’t bother planning for the eventuality of an recipient organization closing.
One way for funders to ensure that public assets survive the death throes of their nonprofit homes is to use a trust. A trust is a legal arrangement designed to guarantee an asset continues to be used for a given purpose, no matter who the owner is. Using trusts to keep public goods public isn’t new: land trusts have operated for decades, and we’ve previously discussed using trusts to preserve data and digital public spaces. Here, trusts effectively serve as estate planning for organizations, to ensure that an ownership dispute never sees the inside of a court. As a GRI winds down, a trustee (perhaps one set up by the funding consortium) would have stepped in to take custody of the research assets.
Beyond the worlds of funders, legal constructions, and bankruptcy courts, there are real consequences: the loss of health research means we know less about how to save lives. It’s that simple. Research is an investment in our collective futures, and we should do everything we can to preserve the best possible version of that future. When funders and nonprofits fail to plan for organizations closing, they shirk their responsibility to safeguard the public interest, and the public suffers for it. With trusts, we can ensure public goods continue to work for the public good, and prevent our best future from turning to ash.