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Maximizing Social Impact: Foundations or Healthcare Venture Capital?

Posted Jul 13, 2015

Talat Imran
Talat Imran

Healthcare Venture Capital v. Foundations Scale

Is it better to take the bandages off a severely burned patient quickly (with higher pain intensity for the patient) or slowly, with lower pain intensity for the patient but over a longer duration? Behavioral economist Dan Ariely personally went through this very painful ordeal, and his nurses chose the first option--to take the bandages off quickly. Turns out they were wrong. It’s better for the patient if the bandages are taken off slowly, according to Ariely's later research. The nurses' intuitive choice was wrong, but they were reluctant to consider an alternative.

Our intuition is wrong, dead wrong sometimes, but why do we continue to act in a predictably irrational way? It’s because it’s hard to accept that our intuition can be so off. For example, we may think we are maximizing our social impact by contributing to healthcare foundations. But, if you want to maximize your social impact in healthcare, you should put your money into for-profit healthcare ventures instead. Business is the engine that drives sustainability. Even the Gates Foundation, which unlike most foundations focuses on implementing solutions as opposed to basic research, is the byproduct of a long-standing, profitable business.

Sustainable Funding

Healthcare foundations constantly ask for money and resources to fund their work, and this approach is similar to grant-funded basic science research. But what if you provide people the capital to build a sustainable revenue model instead of having them spend their time asking for money forever? You would be teaching them how to fish instead.

Not only is it a pathway to a sustainable model of funding for a solution to the problem you want to solve, but it’s also a path toward a sustainable funding model for you. Imagine if you were to receive returns on your healthcare investments--wouldn’t you be more likely to invest even more?

Clearer Impact

Basic science research has been critical to public health improvement, but it can take decades to translate into clinical outcomes. Applied research, however, accelerates outcomes that you may see within your lifetime. If you have a specific disease that you’d like to address, such as breast cancer or epilepsy, you’re better off supporting promising healthcare ventures rather than a foundation, where the ultimate results of the research that is funded may be unclear. If your goal is to improve the general understanding of a particular topic, like neuroscience or genetics, then basic research is your best bet.

Entrepreneurship is what ultimately transforms healthcare and improve people’s lives. Like Dan Ariely said, human beings predictably act in irrational ways. But let’s not let intuition affect our potential to have the greatest social impact possible in healthcare.

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