‘Cost per intervention’ and its role in capital allocation

Cost per intervention (CPI) calculates the cost for an organisation to support one person. It’s a simple calculation that infers how many people will be supported based on an organisation’s operational budget, and how this number changes over time. CPI is one measure to tell us about the efficiency of an organisation to deliver their intervention. In other words, it is a measure of how far that organisation can stretch a dollar to help more people.

When I started in philanthropy, I cringed at CPI. Now I cringe when it’s disregarded.

Adam Smith (philosopher) shares a story to trigger our intuitions differently. He says:

• Imagine I cut off half of your pinky finger. How do you feel? How long would it take for you to stop thinking about it?

• Now, imagine I tell you that 1000s of children are dying right now in Asia. How do you feel? How long would it take for you to stop thinking about it?

On 99% of cases, I think it’s fair to assume that you would lose far more sleep, angst and sadness over your finger. The purpose of this is not to ridicule ourselves. Rather, it’s to acknowledge a shared, very human, flaw — we are not well calibrated to suffering.

We struggle to grasp the magnitude of suffering when someones says that 50,000 people were killed in an earthquake or that one in three children in Country X are malnourished. At some point people turn into statistics and we lose our ability to hold empathy and logic at peace.

So why do I think CPI perhaps isn’t so bad? We should ere on the side of caution when trusting our own instincts about what is “fair”, “moral”, “just”. Time and time again we (humans) are not great judges of these critical values when comparing suffering at extreme scales.

This is where tools like CPI (it’s not the only one) show their greatest utility — to re-calibrate us to consider the extent to which we could help more people. You may not choose the intervention with the lower CPI, that’s ok. There are many more things to consider — like the durability of change, depth of change, or catalytic interventions to lay foundations for further impact. But at the very least, be aware of the opportunity cost — of what (or who) we could be supporting if we maintained some sense of the scale of suffering.