Monopoly.

Excluding the friendship-breaking board game classic, what was the first thought that came into your mind after reading this word? Whatever it was, I bet it wasn’t pretty. It seems to be tribal knowledge that monopolies are intrinsically a bad thing. In a sense, we have been educated to repulse at the mere idea of it. The intersubjective meanings we have attached to this word revolve around greed, power, corruption, and inefficiency.

Now, what would you think if I said “monopolies for social good”?

Some would argue that it is a blaring contradiction, nothing more than an oxymoron. Perhaps some would suspect malicious intentions in such phrase. But is it, really?

I remember that summer very well. The soles of my shoes seemed to be melting with every step I took across the university’s parking lot on my way to my Microeconomics class. Summer 2009 had 40 days straight where temperatures rose over 100 degrees Fahrenheit. Perhaps this was not the best time of the year to be cramming economic models and theory, I thought to myself. My reflection seemed to be confirmed by the professor, who mentioned once that the roof of the classroom reminded him of “a giant and delicious waffle”.

It gets really warm in my beautiful Monterrey. Here you can see our most famous landmark: El Cerro de la Silla.

It gets really warm in my beautiful Monterrey. Here you can see our most famous landmark: El Cerro de la Silla.

Towards the end of that summer class, we finished studying the different models of economic environments or competition. The two extremes in question were “monopolic competition” and “perfect competition”. In a nutshell, perfect competition requires a diversity of equal economic actors interacting in the same market. A monopolic model has one overwhelming actor that drives any other out of the market, since the smaller actors cannot compete with the overhead cost efficiency of the much larger actor.

That is what we need for social good. Monopolies!

Let’s think about the fictional community of Allegretto. Allegretto has a high demand for low-cost housing that is not being supplied, leading to a rising rate of homelessness and lower standards of living for strands of the population. One of the local community leaders, Samantha Andantino, created a nonprofit to build affordable housing for people who need it. The name of the organization is Adagio. With the trust from donors, she is able to procure equipment and material for the tasks that volunteers will use to build houses. Through some tough years of financial dependency on fundraising to meet costs of operation, Adagio has finally become sustainable.

Today, after 15 years of operating, Adagio is now serving Allegretto, Vivace, Presto, and planning to expand to neighboring communities that face similar challenges. Adagio is now a well recognized regional nonprofit and has accumulated significant technical expertise and major construction equipment.

Map of Allegretto's region.

Map of Allegretto’s region.

 

At the same time, a very similar nonprofit starts operations in the neighboring community of Ritardando. This nonprofit, named Largo, has copied Adagio’s model and implemented it in Ritardando. The founders of Largo volunteered many times at Adagio and decided to start the same model in their community.

After 2 years of opening its doors, Largo has to cease operations, as it did not achieve sustainability to keep the organization running. It received a significant grant from a large donor in the region at the beginning, but it depended heavily upon it and could not diversify its income sources.

What can we learn from this story? There was an unmet need in Ritardando that required action. The founders of Largo, instead of inviting Adagio to collaborate, decided to copy the model and implement it from scratch in their community. While the action had the true intention of doing social good in Ritardando, the plan was competitive in nature, rather than collaborative.

If we see both nonprofits, they were not direct competitors, as they did not serve the same community. Nevertheless, both nonprofits operated in the same subject matter, therefore they would indeed overlap each other if they existed in the same community. Given the proximity of the larger and more experienced Adagio, a much better solution would have been to collaborate with them to open a chapter in Ritardando and make use of the tried and true experience and infrastructure that Adagio has accumulated in 15 years.

The more sophisticated a nonprofit gets, the more efficient it becomes with its overhead and operating costs. To achieve the same outcome, Largo needed to spend 3 dollars when Adagio could do so with only 1. In this way, much of Largo’s grant money was spent inefficiently.

In conclusion, we must support and empower nonprofits who are unique in their offering, so that they can achieve a better operating model and maximize the social good from their programs. The nonprofit sector does not reach maximum efficiency under perfect competition. On the contrary, nonprofits overlapping each other lead to inefficiency, loss of resources, and less impact on the community served.

In the nonprofit sector, we must seek to collaborate. We must seek partnerships and create bridges with other nonprofits to meet the needs of our communities. We must seek a champion for each need, not a multitude of actors for each one.

P.S. The roof did look like a giant delicious waffle.

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