Tag Archives: Short Selling

On the problem of not being able to short sell non-profits

Robert Shiller had an interesting article in the NYT on why housing markets are not always efficient.

More pertinent to this blog:

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I wish it were possible to short non-profits. I don’t really know how it would work / it’s probably not possible, but not having this type of function harms people in need.

Over time, short selling would reallocate resources to organizations that could provide much better outcomes if those in need.

Everywhere I look, I see non-profit “bubbles,” especially in education reform.

But funders have weak information, or misaligned incentives with those they are serving, so money keeps on flowing.

Short selling, or some version of it, could prevent money from going to organizations that have little to no chance of achieving their aims, as well meaning as they might be. And it could drive funding to organizations that could do amazing things.

If I was going to short non-profit education activity, it would be in these areas:

1) Efforts that mistake coordination for strategy.

2) Efforts that do not affect, or do not tightly align themselves, with what happens between 8AM-3PM.

Of course, the short selling analogy is flawed. The non-profit sector is a different animal than the for-profit sector.I get it.

The main point here is that it is important for there to be a public, meaningful signal against efforts that are likely to fail.

Without that, we all risk walking aimlessly in the dark.