Some months back, I came across a fascinating NY Times article that discussed how the “kids” at Google found yet another innovative way of taking our “free data” and using it for a good cause. In this case, recent evidence suggest that when Internet users’ search for information on, oh, let’s say “flu-like symptoms” that Google “may be able to detect regional outbreaks of the flu a week to 10 days before they are reported to the Center for Disease Control and Prevention.” What a Brave New World (Mr. Huxley)!

What this example succinctly illustrates is what “Researchers have long said–that the material published on the Web amounts to a form of [collective intelligence] that can be used to spot trends and make predictions” (NY Times). Wikipedia, a kind of “collective intelligence,” turned author, is harnessing such wisdom through its Wikinvest Web site; Wikinvest is building and archiving a database of user-generated investment information on popular stocks, for free of course.

Now, where I’m going with this is back in October of 2008, the Harvard Business Review published an article entitled “How Wise Crowds Can Advance Philanthropy,” by Steven H. Goldberg. Mr. Goldberg, the Chief Operating Officer of Cradles to Crayons, a nonprofit that aims “to provide children-in-need with high quality everyday supplies,” suggests that we in the nonprofit sector should be thinking about how to harness this “collective wisdom.”

Mr. Goldberg writes that most mid-sized nonprofit organizations possess some of the most “innovative solutions” to today’s problems. However, as he notes, there is a dearth of “reliable information about the relative performance of nonprofits,” so as a result “billions of philanthropic dollars annually are distributed haphazardly among more than 1.5 million organizations, some deserving, some less so.”

His solution: use guidance markets to “consolidate information about which nonprofits provide the highest social returns on investment, thus guiding donors to the most attractive opportunities.” He further elaborates on just what this guidance market might look like: “This market could list virtual [stocks] in the form of questions,” and essentially evaluate each nonprofit on whether they accomplish their beginning of year outputs and outcomes.

The idea here is that the collective wisdom of the public “would drive virtual prices up or down depending on whether traders considered the market assessments too low or too high based on dispersed information including strategic hires, grants and sponsorships, regulatory developments, and…performance.” Furthermore, “by revealing the consensus judgment of potentially millions of donors, employees, and volunteers in the nonprofit sector, the market could forecast the relative success of organizations competing for donations.”

Finally, what I like most about this idea is that as Goldberg writes, “If collective intelligence could index nonprofits’ effectiveness, social enterprises would have an incentive to collect and report performance data to improve their [stock].” Think of it: greater sector transparency, a clearer recognition by stakeholders of nonprofit best practices, and more opportunities for smaller nonprofits to compete against larger organizations for funding. Sounds like an idea worth investing in.