When an investor makes an investment, they can calculate their return with absolute precision. How much money did she put in, how much did she get back and how long did it take? That’s it. The answers are all numerical and can be calculated out to the fifth decimal place.
But what about the Social Return on Investment? If a donor makes a gift to a nonprofit, what is the “return” on that gift? How much “good” was achieved? The dollar amount given is easy, but “calculating” the “good” done is tough. First because knowing what “good” means is hard, secondly because relating “good” to dollars is like translating a symphony into organic chemistry, and third because identifying cause and effect is tough (did your grant create more jobs, or did the economy just happen to get better?).
I don’t think we’ll ever be able to honestly make statements like “My $10,000 donation achieved a 9.2% SROI”. That would be like calculating that The Great Gatsby was a better investment of your time than Freakonomics. However, humans constantly make decisions about what works and what doesn’t. We confidently make decisions about whether we should spend our Sunday afternoon rock climbing, volunteering, playing with the kids or going to the office without any sort of numerical framework to help us. That’s because we use a narrative context.
Kevin Jones, blogging at Xigi.net is working on a project he calls StoryIndex:
Social value is best understood in narrative form. Financial value is best understood in numerical form. Both are valid ways of encapsulating fungible value. Our StoryIndex project is trying to create a way to quantify narrative to accelerate the flow of capital to good.
In another post, he writes:
Here is what we are doing: mapping the new nascent exchanges, composing a glossary and translation table of how they define value in other than monetary terms