One of the things I find hard is the externalities, because often there are tons of things that a company is influencing. For example, with Heroes & Friends (our company) we try to built a platform for social movements (NGOs, social enterprises, etc.) and we don’t control who is using it. So it can be used for ineffective movements but also highly effective ones. However, in our view we see a new society emerging where people take action themselves and take responsibility to improve their own community and help other people too. So on the surface it might have less direct impact (depending on the users) but on the long-term we want to be the market place of the ‘informal economy’ where people can ‘harvest goodwill’. In order for this bottom-up economy to self-organize it needs a system or marketplace that provides the technology to do so, and we are basically building the best software for social movements to grow. But how would you include or exclude externalities? Which ones do you count and which ones do you leave out?
Is it a positive externality that more than 1 million people read good news stories and opportunities to act in their social media because of our platform or not? Is it a negative externality that many projects are not optimalized for ‘doing the most good’? I’m just wondering how we could measure this for our own company but also for many others because I think there should be a lot of data points included.
I think it’s worth trying to have a toy model of this, even if it’s mostly big boxes full of question marks. Going down to the gears level can be very helpful.
For example, it can help you answer questions like “how much good does doing X for one person have to do for this to be worth it?”, or “how many people do we need to reach for this to be worth it?”. You might also realise that all your expected impact comes from a certain class of thing, and then try and do more of that or measure it more carefully.
Which externalities to include is a tough question! In most examples I think there are a few that are “obviously” the most important, but that’s just pumping my intuition and probably missing some things. I think often this is a case of building out your “informal model” of the project: presumably you think it will be good, but why? What is it about the project that could be good (or bad)? If you can answer those questions you have at least a starting point.
One final thing: when I say “negative externality” I mean something that’s actively bad. It seems unlikely that people using your platform for ineffective projects is bad, but rather neutral (since we think they’re not very effective). What might be bad could be e.g. reputational damage from being associated with such things.