Not your Father’s Thousand Points of Light

A Process that (very strangely) is under the radar of most right now is the expansion of the Not-for-Profit Sector into fields that were traditionally the exclusive reserve of the for profits. There was an interesting article in The McKinsey Quarterly* a while back that caught my attention with some facts about the Not-for-Profit sector:

1. The NFP sector as of 1997 was the third largest contributor to the GDP, contributing $349 billion to the U.S. economy, dwarfing the $85 billion contributed by the motor vehicle parts and manufacturing sector

2. The NFP/NGO sector employs 1 in 15 of employed Americans.

3. This sector has grown at an average annual rate of 5.1% from 1993 to 1998, beating GDP growth which was 3.1% annually

So the NFP sector is quite large. What’s more, it’s morphing into many roles that have been led by the for-profit sector, for example, Drug Discovery. Two interesting NFP’s with huge research components are the Donald Danforth Plant Science Center and St. Jude’s Children’s Research Hospital. (Disclosure: I have done a bit of Architectural work for S.J.C.R.H.) Note that historically NFP’s have played important roles in healthcare, but recently, with advent of mega Pharma, it’s been a little forgotten. The many market failures of the for-profit pharmaceutical sector, although not so well publicized, have not gone un-noticed: (From Amartya Sen, Identity and Violence, [page 140-141] which I have just finished):

The counterproductive patent regimes that exist–and rule–at the moment also provide very inadequate incentive for medical research aimed at developing new medicines (including non-repeating vaccines) that would be particularly useful for the poorer people of the world whose ability to offer a high price for such medicines is quite limited. The reach of incentives in producing medical innovations of specific benefit to low income people can be puny indeed. This is well reflected in the heavy bias of pharmaceutical research in the direction of catering to those with more income to spend.

But, there are some interesting developments. First, from the Economist:

All shall have prizes
Mar 1st 2007 | NEW YORK
From The Economist print edition
Will a boom in philanthropic prize-giving change the world?

TYCOONS gathering this weekend at Google’s Silicon Valley headquarters will be giving money away, not trying to make more. Larry Page, one of the search firm’s founders and, with a personal fortune estimated at over $14 billion, one of the world’s richest 33-year-olds, is holding a fundraiser for one of his favourite charitable causes, the X Prize Foundation. The foundation is a force behind one of the most intriguing trends in philanthropy: promoting change by offering prizes.
It has worked before. The chronometer was invented to win an 18th-century British government prize. Charles Lindbergh flew the Atlantic to win $25,000 offered by Raymond Orteig, a hotelier. That inspired Peter Diamandis, the X Prize’s creator, to offer $10m for the first private space flight, won in 2004 by SpaceShipOne.

In October the foundation launched its second prize, for genomics: $10m to the first inventor able to sequence 100 human genomes in ten days. In the same month Mo Ibrahim, a Sudanese mobile-phone entrepreneur, endowed an annual prize of $5m plus $200,000 a year for life for former African leaders reckoned to have governed well. Last month a British entrepreneur, Sir Richard Branson, launched the Virgin Earth Challenge, offering $25m to the inventor of a commercially and environmentally viable method of removing greenhouse gases from the atmosphere.

And then From IP watch, an example of a new anti-malarial being developed and NOT patented:

NGO-Industry Drug For Poor Countries Sets Non-Patent Standard
posted by Tove Iren S. Gerhardsen @ 4:09 pm

By Tove Iren S. Gerhardsen

A new anti-malarial, non-patented drug available cheaply to the public sector is being hailed as proof that it is possible for the private and public sectors to overcome differences over patents and reach concrete results for public health in poor countries.

The not-for-profit research organisation, Drugs for Neglected Diseases initiative (DNDi), and the French pharmaceutical company, Sanofi-Aventis, are the partners behind the new drug, which soon will be available “non-patented for the public” in Sub-Saharan Africa and elsewhere, a DNDi spokesperson told Intellectual Property Watch.

Also, of interest is PIPRA, the Public Intellectual Property Resource for Agriculture, an initiative to promote the sharing of plant science intellectual property, which the above-referenced Danforth Plant Science Center participates in. From their website:

PIPRA is an initiative by universities, foundations and non-profit research institutions to make agricultural technologies more easily available for development and distribution of subsistence crops for humanitarian purposes in the developing world and specialty crops in the developed world.

My conclusion is that the NFP sector is more dynamic than it has ever been, and moreover it has several crucial advantages to the for-profit sector in the next wave of globalization (more on that in the series on Globalization) It will be fascinating to watch the NFP sector evolve. It also is apparently going to catch everyone (well nearly everyone, except of course EF readers!) off-guard.

* Lowell, Stephanie; Silverman, Les & Taliento, Lynn. “Not-for-profit Management: The gift that keeps on giving.” The McKinsey Quarterly 2001. No. 1. pg. 147.

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